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Sempra Projects a Positive Outlook

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Sempra Energy (SRE - Free Report) has re affirmed its earnings guidance for FY12 and provided its outlook for FY13 and FY16, prior to its analyst meeting in San Diego.

The company expects earnings per share to be in the range of $4.00 to $4.30 in fiscal 2012 and in the range of $4.10 to $4.40 in FY13. The company aims for earnings in the range of $5.50 to $6 per share in 2016.

Through a four-year period, from fiscal 2012 to fiscal 2016, the company expects annual capital expenditure and investments of approximately $2.7 billion.

In February this year, Sempra announced its fourth quarter and fiscal 2011 earnings results.  For the fourth quarter, the company reported pro forma earnings of $1.21 per share, easily surpassing the Zacks Consensus Estimate of $1.06 and the year-ago quarterly figure of $1.15 per share. 

Besides focusing on earning profits, the company is also considering environmental impact, and devising ways to save the environment. The Appliance Recycling Program is one such initiative that provides its customers a rebate to recycle their old, working refrigerators, freezers and room air conditioners.

The company is pursuing its Appliance Recycling Program with Appliance Recycling Centers of America, Inc. (“ARCA”), which is one of the nation's largest recyclers of major household appliances. The environmental benefits of recycling include safe management of hazardous materials and reduced energy consumption. The processes used by ARCA curb the release of greenhouse emissions, ozone layer depleting substances, mercury and oil into the environment.

In the last two years, as many as 34,000 customers recycled appliances, leading to reduced annual greenhouse emissions corresponding to the amount released by 4,500 passenger vehicles. On an average, they also managed to save more than $200 on their annual energy bill. 

We believe that key growth drivers of the company include stable utility earnings, steady progress at its LNG terminals, the Sunrise Powerlink transmission line, ongoing installations of smart meter and renewable power projects in the Pacific Southwest. Also, Sempra Energy’s diversified basket of businesses insulates its operations to a significant degree from regulatory rate risks.

However, we are concerned due to a lack of near-term positive triggers, along with fluctuations in natural gas prices, an ongoing land dispute regarding its LNG terminal in Mexico and pending regulatory cases.

The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas. The company’s businesses are broadly divided into Sempra Utilities, and Sempra Global and parent. The company mainly competes with Edison International (EIX - Free Report) and PG&E Corporation (PCG - Free Report) .

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