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Why is Sempra Energy (SRE) Down 6.6% Since its Last Earnings Report?

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It has been about a month since the last earnings report for Sempra Energy (SRE - Free Report) . Shares have lost about 6.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is SRE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sempra Energy Misses Q1 Earnings & Revenue Estimates

Sempra Energy’s first-quarter 2018 adjusted earnings per share of $1.43 lagged the Zacks Consensus Estimate of $1.67 by 14.4%. Earnings dropped 17.8% from the prior-year quarter figure of $1.74.

Barring the one-time adjustments, the company reported GAAP loss of $1.33 per share in the quarter, against earnings of $1.75 in the prior-year quarter.

Total Revenues

In the quarter under review, total revenues were $2,962 million, down 2.3% year over year primarily due to lower contribution from the Utilities business (down 3.7%), marginally offset by strong contribution from the energy-related businesses (up 9.3%). Total revenues also missed the consensus mark of $3,422 million by 13.4%.

Highlight of the Release

During the quarter, the company completed the acquisition of 80% indirect ownership interest in Oncor for $9.45 billion, after receiving necessary regulatory approval.

Cost of electric fuel and purchased power in the reported quarter was $546 million, up 3.6% from a year ago.

Interest expenses in the reported quarter were up 27.8% year over year to $216 million.

Segment Update

San DiegoGas & Electric (SDG&E): Quarterly earnings in this segment were $170 million compared with the year-ago figure of $155 million.

Southern California Gas Company (SoCalGas): The segment registered earnings of $225 million in the first quarter compared with $203 million in the year-ago quarter.

Sempra South American Utilities: The segment recorded earnings of $46 million in the first quarter, down from $47 million in the prior-year quarter.

Sempra Mexico: The segment reported earnings of $20 million, compared with $48 million recorded in the prior-year quarter.

Sempra Renewables: The segment recorded quarterly earnings of $21 million, up from $11 million in the prior-year quarter.

Sempra LNG & Midstream: The segment reported a loss of $16 million against the year-ago quarter’s earnings of $1 million.

Financial Update

As of Mar 31, 2018, Sempra Energy’s cash and cash equivalents were $239 million compared with $288 million as of Dec 31, 2017.

Long-term debt was $20,863 million as of Mar 31, 2018 compared with $16,445 million at the end of 2017.

Cash flow received from operating activities in the first quarter was $966 million, down from $1,004 million received in the year-ago quarter.

Guidance

Sempra Energy reaffirmed its 2018 earnings in the band of $5.30-$5.80.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

Sempra Energy Price and Consensus

 

Sempra Energy Price and Consensus | Sempra Energy Quote

VGM Scores

At this time, SRE has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

SRE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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