Sempra Energy Resilient

Sempra Energy (SRE - Analyst Report) posted strong third quarter results of $1.27 per share, beating the Zacks Consensus Estimate of $1.19 by 8 cents. The company also beat the year-ago earnings per share (EPS) of $1.24 by 3 cents. This is commendable since Sempra Energy had witnessed a steep fall in its topline year-over-year. The upside in earnings came mainly from its commodities-trading joint venture with Royal Bank of Scotland Group Plc. -- RBS Sempra Commodities.

Sempra Energy is an energy services holding company involved in the sale, distribution, storage and transportation of natural gas. The company operates through two segments -- Sempra Utilities and Sempra Global. Sempra Utilities consists of two California regulated public utility companies, Southern California Gas Company (SoCalGas) and San Diego Gas & Electric (SDG&E). Sempra Global consists of businesses engaged in providing energy products and services -- Sempra Commodities, Sempra Generation, Sempra Pipelines & Storage and Sempra LNG.

Quarterly Results

The southern California-based company’s revenue however declined by 31.7% year-over-year to $1.9 billion, owing to lower demand in the quarter. The downside came from both Sempra Utilities and Sempra Global segments. Sempra Utilities’ topline reduced to $1.4 billion from $2.0 billion year-over-year. Sempra Global revenue also shrank to $429 million from $679 million in the year-ago period.

Sempra Utilities’ regulated utilities earnings also fell year-over-year. San Diego Gas & Electric’s earnings were $108 million compared with $123 million year-over-year. However, year-ago quarterly earnings were boosted by $33 million from the retroactive application of a rate case approved in July 2008.

Southern California Gas Co.’s earnings fell to $74 million from $77 million in the third quarter of 2008. However, year-ago quarterly earnings benefited from $7 million in earnings from the retroactive application of the same rate case.

Sempra Global and Parent, however, reversed the falling trend. RBS Sempra Commodities earnings rose to $75 million in the reported quarter compared to a loss of $8 million in year-ago quarter. The improvement was primarily on account of improved performance in natural gas marketing. Also, year-ago results were affected by losses in power marketing caused by the steep decline in commodity prices.

Sempra Pipelines & Storage also contributed to the upside in earnings with $54 million, as compared to $34 million in the year-ago quarter. The improvement was due primarily to lower income taxes and increased contributions from the Rockies Express pipeline.

Sempra Generation’s earnings however fell to $43 million, compared to $94 million in the year-ago quarter. However, year-ago quarterly results were boosted by $28 million of mark-to-market earnings on long-term contracts, besides $8 million from a solar investment tax credit and more favorable market pricing. Sempra LNG also reported a breakeven quarter compared to earnings of $4 million in the year-ago quarter.

Sempra Energy reported cash and cash equivalents of $756 million at the end of the first nine months of fiscal 2009 from $331 million at year-end fiscal 2008. The company reported $1.9 billion in cash from operating activities at the end of the first nine months of fiscal 2009, compared to $805 million at the end of the first nine months of fiscal 2008. Long-term debt increased to $6.8 billion at the end of the first nine months of fiscal 2009 from $6.5 billion at the end of fiscal 2008.

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