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Why Is Sempra (SRE) Up 0.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Sempra (SRE - Free Report) . Shares have added about 0.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sempra due for a pullback? 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 catalysts.

Sempra Energy Q2 Earnings Beat, Revenues Improve Y/Y

Sempra Energy’s second-quarter 2018 adjusted earnings per share (EPS) came in at $1.35, beating the Zacks Consensus Estimate of $1.17 by 15.4%. Earnings also improved 22.7% from the prior-year quarter figure.

Barring one-time items, the company incurred a GAAP loss of $2.11 per share in the quarter, against earnings of $1.03 in the year-ago quarter.

Total Revenues

In the quarter under review, total revenues were $2,564 million, up 1.2% year over year on higher contributions from its energy-related businesses (up 11.3%). However, total revenues lagged the consensus mark of $2,708 million by 5.3%.

Segment Update

San Diego Gas & Electric (SDG&E): Quarterly earnings came down to $146 million from the year-ago bottom line figure of $149 million.

Southern California Gas Company (SoCalGas): The segment registered earnings of $33 million in the second quarter of 2018, down from the year-ago earnings of $58 million.

Sempra South American Utilities: The segment recorded earnings of $44 million in the second quarter, marginally down from $45 million in the prior-year quarter.

Sempra Mexico: The segment recorded net earnings of $97 million, against the net loss of $9 million recorded in the prior-year quarter. The bottom line deteriorated due to the impairment of Sempra Mexico's Termoeléctrica de Mexicali (TdM) assets that were held for sale until June 2018.

Sempra Renewables: The segment recorded net quarterly loss of $109 million, against the net earnings of $23 million in the prior-year quarter.

Sempra LNG & Midstream: The segment reported a net quarterly loss of $764 million, against the year-ago quarter’s income of $27 million. The bottom line deteriorated due to an impairment of certain non-utility natural gas storage assets in the southeast United States at Sempra LNG & Midstream.

Parent and Other: Quarterly loss rose to $122 million compared with the year-ago loss of $34 million.

Financial Update

As of Jun 30, 2018, Sempra Energy’s cash and cash equivalents were $252 million compared with $288 million as of Dec 31, 2017.

Long-term debt was $21,278 million as of Jun 30, 2018, compared with $16,445 million at 2017 end.

Cash flow from operating activities was $1,629 million at the end of second-quarter 2018, down from $1,889 million at the end of the prior-year period.

In the second quarter, the company’s capital expenditures and investments were $1,112 million compared with $848 million in the prior-year quarter.

Highlight of the Quarter

Sempra Energy, in the second quarter of 2018, raised $1.82 billion in equity offerings. The funds will be used to finance the acquisition of an 80.25% stake in Oncor Electric Delivery Co. with approximately 65% in equity.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -11.59% due to these changes.

VGM Scores

Currently, Sempra has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Sempra has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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