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What's in the Cards for Sempra Energy's (SRE) Q3 Earnings?

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Sempra Energy (SRE - Free Report) is set to report third-quarter 2020 results on Nov 5, before market open.

In the last reported quarter, the company delivered a negative earnings surprise of 0.60%. However, it surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the remaining one, the average surprise being 12.79%.

Let’s see how things have shaped up prior to this announcement.

Factors Under Consideration

During most of the third quarter, major parts of California experienced above- to much-above-average temperatures, highlighted by dry and warm weather conditions. Especially in August and September, California ranked the warmest on record for maximum temperatures. This is likely to have resulted in higher electricity demand for cooling purposes, which is likely to have boosted Sempra Energy's top line in the third quarter.

Nevertheless, the current market challenges, courtesy of the COVID-19 pandemic, have been weighing on the country’s overall energy demand, which in turn might have adversely impacted Sempra Energy’s quarterly revenue performance.

Notably, the Zacks Consensus Estimate for third-quarter revenues is pegged at $2.60 billion, suggesting a 5.6% decline from the year-ago quarter’s tally.

The company witnessed another active fire season in California, characterized by several large wildfires throughout the third quarter. This might have escalated the company’s wildfire-related costs during the quarter.

Further, the overall cost structure is expected to have escalated due to the prolonged economic impact of the COVID-19 pandemic on the company's operations. Such expenses might have had an adverse impact on the company’s bottom-line performance during the soon-to-be-reported quarter.

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.47 per share, implying a 2% decline from the year-ago quarter’s reported figure.

Furthermore, the company’s subsidiary, Oncor, is projected to set a record for interconnection requests in 2020, primarily driven by an increase in solar generation activity. Through July itself, there were approximately 270 transmission interconnection requests compared to the 300 requests made in the entire 2019. We believe Oncor to have received similar robust interconnection requests through the remainder of third-quarter 2020, which in turn might have benefited Sempra Energy’s quarterly performance.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Sempra Energy this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sempra Energy carries a Zacks Rank #2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sempra Energy Price and EPS Surprise

Stocks to Consider

Here are some players from the Utilities sector that have the right combination of elements to post an earnings beat this season.

SJW Group (SJW - Free Report) is set to release third-quarter earnings on Nov 5. It has an Earnings ESP of +2.15% and a Zacks Rank #3, currently.

BCE, Inc. (BCE - Free Report) is set to release third-quarter earnings on Nov 5. It has an Earnings ESP of +7.27% and a Zacks Rank #3, currently.

A Recent Utility Release

American Electric Power (AEP - Free Report) reported third-quarter 2020 adjusted earnings per share of $1.47, which beat the Zacks Consensus Estimate of $1.46 by 0.7%.

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