We issued an updated research report on Sempra Energy (SRE - Free Report) on Sep 11. This electricity and natural gas provider enjoys a significant position in the Utilities sector, given its stable earnings from subsidiaries.
Going ahead, the company expects to witness a long-term CAGR of 10-11% in its earnings per share (EPS) in the 2017-2021 time frame, almost double the CAGR of 5-6% anticipated for the S&P 500 Utilities on average.
Realizing the demand and prospects of renewable energy, Sempra Energy has already started to add solar, wind and hydro assets to its portfolio. Toward this end, in July 2017, the company acquired solar projects capable of producing up to 200 MW of solar power in Fresno County, California. Commercial operation and corresponding contracted energy sales from these projects are expected to commence in phases beginning the fourth quarter of 2017 and the first half of 2018.
In terms of financial stability, the company boasts strong cash balance reserve, which in turn helps it to maintain solid cash deployment strategies. Currently, Sempra Energy continues to keep its annual dividend increase target at 8% to 9% over the next few years. Its efforts on maximizing shareholders value through regular dividend payments will retain investors’ interest in the stock.
Notably, strong capital deployment strategies may have led the company to outperform its broader industry. Evidently, Sempra Energy’s share price has gained 19.3% on a year-to-date basis, higher than the broader industry’s 11.2% gain.
On the flip side, Sempra Energy has been suffering, with the nuclear industry facing difficult times, given the availability of low-priced natural gas and the government-subsidized wind sector. Meanwhile, the permanent shutdown of Units 2 and 3 of the company’s San Onofre Nuclear Generating Stations (SONGS) in California is likely to worsen the situation. Moreover, the company continues to incur considerable expenses in relation to the Aliso Canyon gas leak, which in turn may bring down its operating profit.
The company also faces tough competition from its peers like Just Energy Group, Inc. (JE - Free Report) , NewJersey Resources Corporation (NJR - Free Report) and Clean Energy Fuels Corporation (CLNE - Free Report) .
Sempra Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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