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Sempra Energy (SRE) to Report Q2 Earnings: What's in Store?

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Sempra Energy (SRE - Free Report) is set to report second-quarter 2019 results on Aug 2, before market open.

In the last reported quarter, the company delivered a positive earnings surprise of 13.61%. Also, it surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average earnings beat being 10.99%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Sempra Energy’s service territories witnessed above-average maximum temperature for most parts of the second quarter. As a result, increased electricity demand in its service territory must have provided a boost to the company’s top-line performance.

However, in May, the company experienced severe thunderstorms in California. This resulted in strong outflow winds and localized flash flooding, which might have caused widespread outage across the company’s service territory and affected its revenues in the second quarter.

For quarterly revenues, the Zacks Consensus Estimate stands at $2.32 billion, suggesting a 9.6% decline from the year-ago quarter’s reported figure.

Sempra Energy Price and EPS Surprise

Sempra Energy Price and EPS Surprise

Sempra Energy price-eps-surprise | Sempra Energy Quote

In May, Sempra Energy’s subsidiary Oncor Electric completed the acquisition of InfraREIT, while Sempra Energy bought 50% limited-partnership interest in Sharyland Utilities. Although these acquisitions are expected to boost Sempra Energy’s long-term growth potential, its bottom line in the second quarter is expected to be hurt on account of approximately $1.3 billion costs related to these buyouts.

Such expenses and the aforementioned dismal revenue expectations are likely to be a drag on Sempra Energy’s earnings performance in the soon-to-be-reported quarter. The Zacks Consensus Estimate for quarterly earnings is pegged at $1.19, indicating an 11.9% decline from the year-earlier reported figure.

During the second quarter, Sempra Energy completed the sale of its U.S. renewables business and non-utility natural gas storage assets for approximately $2.5 billion in total cash proceeds. We may thus expect the company’s cash flow statement to duly reflect the sale proceeds from this divestiture in the soon-to-be-reported quarter.

Furthermore, Sempra Energy’s Cameron LNG shipped the first commissioning cargo of liquefied natural gas (LNG) from the first liquefaction train of the export project in May. We may expect more updates on this project once the company releases its quarterly result.

Earnings Whisper

Our proven model does not show that Sempra Energy is likely to beat estimates in second-quarter 2019. This is because a stock needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Sempra Energy has an Earnings ESP of -0.80%.

Zacks Rank: The company currently carries a Zacks Rank #4.

Stocks That Warrant a Look

Here are a few other players from the Utilities sector that have the right combination of elements to post an earnings beat this quarter.

Pinnacle West Capital Corporation (PNW - Free Report) has an Earnings ESP of +0.06% and a Zacks Rank #3. The company is expected to release second-quarter 2019 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Black Hills Corporation (BKH - Free Report) is scheduled to release second-quarter 2019 results on Aug 5. It has an Earnings ESP of +0.75% and a Zacks Rank of 3.

PPL Corporation (PPL - Free Report) is scheduled to release second-quarter 2019 results on Aug 6. It has an Earnings ESP of +1.18% and a Zacks Rank of 3.

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