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Sempra Energy appears well positioned on the back of stable earnings from its utility subsidiaries. The company continues to make systematic investments in infrastructure development projects.
Sempra closed the sale of its equity interest in REX in the second quarter of 2016. This provided the utility $440 million in proceeds. As a result of the sale, the company expects a reduction of approximately $60 million in partial year 2016 earnings, which is included in its adjusted earnings guidance range of $4.60 per share to $5.00 per share.
Sempra plans to permanently release all uncontracted capacity. The negative earnings impact of this capacity release is projected to be between $100 million and $120 million and will be recorded in the second quarter.
As per the Zacks Consensus Estimate, second-quarter earnings are pegged at $1.00 per share, reflecting 3.11% year-over-year decline.
Earnings Whispers
Our proven model does not conclusively show that Sempra Energy is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.00%. This is because the Most Accurate estimate stands at $1.02, while the Zacks Consensus Estimate is pegged slightly lower at $1.00. This is a meaningful indicator of a likely positive earnings surprise.
Zacks Rank: Sempra Energy’s Zacks Rank #4 when combined with a positive ESP makes a surprise prediction difficult. As it is, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few players in the utility space, which have the right combination of elements to post an earnings beat this quarter:
AES Corp. (AES - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #3. It is slated to report earnings on Aug 5.
Entergy Corporation (ETR - Free Report) has an Earnings ESP of +6.73% and a Zacks Rank #3. It is expected to report earnings on Aug 2.
Avista Corp. (AVA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #2. It is expected to report earnings on Aug 3.
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Sempra Energy (SRE) Q2 Earnings: Stock to Disappoint?
Energy services holding company, Sempra Energy (SRE - Free Report) will report second-quarter 2016 earnings results before the opening bell on Aug 4.
Last quarter, Sempra Energy recorded a 9.82% negative earnings surprise. Let’s see how things are shaping up for the second quarter.
SEMPRA ENERGY Price and EPS Surprise
SEMPRA ENERGY Price and EPS Surprise | SEMPRA ENERGY Quote
Factors to Consider
Sempra Energy appears well positioned on the back of stable earnings from its utility subsidiaries. The company continues to make systematic investments in infrastructure development projects.
Sempra closed the sale of its equity interest in REX in the second quarter of 2016. This provided the utility $440 million in proceeds. As a result of the sale, the company expects a reduction of approximately $60 million in partial year 2016 earnings, which is included in its adjusted earnings guidance range of $4.60 per share to $5.00 per share.
Sempra plans to permanently release all uncontracted capacity. The negative earnings impact of this capacity release is projected to be between $100 million and $120 million and will be recorded in the second quarter.
As per the Zacks Consensus Estimate, second-quarter earnings are pegged at $1.00 per share, reflecting 3.11% year-over-year decline.
Earnings Whispers
Our proven model does not conclusively show that Sempra Energy is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.00%. This is because the Most Accurate estimate stands at $1.02, while the Zacks Consensus Estimate is pegged slightly lower at $1.00. This is a meaningful indicator of a likely positive earnings surprise.
Zacks Rank: Sempra Energy’s Zacks Rank #4 when combined with a positive ESP makes a surprise prediction difficult. As it is, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few players in the utility space, which have the right combination of elements to post an earnings beat this quarter:
AES Corp. (AES - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #3. It is slated to report earnings on Aug 5.
Entergy Corporation (ETR - Free Report) has an Earnings ESP of +6.73% and a Zacks Rank #3. It is expected to report earnings on Aug 2.
Avista Corp. (AVA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #2. It is expected to report earnings on Aug 3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>