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Sempra (SRE) Up 6.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Sempra (SRE - Free Report) . Shares have added about 6.6% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Sempra Energy Q1 Earnings Beat, Revenues Improve Y/Y

Sempra Energy’s first-quarter 2019 adjusted earnings per share (EPS) came in at $1.92, surpassing the Zacks Consensus Estimate of $1.69 by 13.6%. The bottom line also improved 34.3% from $1.43 registered in the prior-year quarter.

Barring one-time items, the company generated GAAP earnings of $1.59 per share compared with $1.33 in first-quarter 2018. This year-over-year upside was driven by solid top-line performance.

Total Revenues

In the quarter under review, total revenues of $2,898 million increased 14.3% year over year on higher contributions from both its Utilities (up 14.8%) and energy-related businesses (up 10.7%). The top line, however, missed the consensus mark of $3,120 million by 7.2%.

Segment Update

San Diego Gas & Electric (SDG&E): Quarterly earnings amounted to $176 million compared with the year-ago quarter’s $170 million.

Southern California Gas Company (SoCalGas): At this segment, quarterly earnings totaled $264 million in the first quarter of 2019 compared with $225 million registered in the prior-year quarter.

Sempra Texas Utility: Earnings at this segment came in at $94 million in the reported quarter compared with earnings of $15 million in the year-ago quarter.

Sempra Mexico: The segment recorded net earnings of $57 million compared with $20 million in the year-ago quarter.

Sempra Renewables: The segment recorded net quarterly earnings of $13 million compared with $21million in the first quarter of 2018.

Sempra LNG: The segment reported earnings of $5 million against the year-ago quarter’s loss of $16 million.

Parent and Other: Quarterly loss at this division increased to $117 million from the year-ago quarter’s loss of $109 million.

Financial Update

As of Mar 31, 2019, Sempra Energy’s cash and cash equivalents totaled $78 million compared with $102 million as of Dec 31, 2018.

Long-term debt amounted to $19,738 million as of Mar 31, 2019, compared with $20,903 million at 2018 end.

Cash flow from operating activities was $951 million at the end of first-quarter 2019, down from $966 million at the end of first-quarter 2018.

In the reported quarter, the company’s capital expenditures, investments and acquisitions summed $877 million compared with $10,596 million in the first quarter of 2018.

Highlights of the Quarter

In March 2019, Sempra Energy increased its projected share of full run-rate earnings from the first three trains at Cameron LNG to $400-$450 million annually, up from $365-$425 million anticipated earlier. Sempra Energy expects to begin recognizing earnings from Train 1 in mid-2019.

In the quarter under review, the company also announced the sale process of its equity interests in its South American businesses, including its 83.6% stake in Luz del Sur S.A.A. in Peru and a 100% stake in Chilquinta Energía S.A. in Chile. First-round bids are expected in June.

2019 Guidance

Sempra Energy reaffirmed its earnings guidance for 2019. The company still expects to generate earnings of $5.70-$6.30. The Zacks Consensus Estimate for full-year earnings stands at $6.01 per share, slightly above the midpoint of the company projected view.

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 -7.07% due to these changes.

VGM Scores

At this time, Sempra has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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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