Sempra (SRE) Up 4.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Sempra (SRE). Shares have added about 4.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Sempra Energy Q1 Earnings Top Estimates, Revenues Miss

Sempra Energy’s first-quarter 2020 adjusted earnings per share (EPS) came in at $3.08, surpassing the Zacks Consensus Estimate of $2.32 by 32.8%. The bottom line also surged 60.4% from $1.92 in the prior-year quarter.

Barring one-time items, the company generated GAAP earnings of $2.53 per share compared with $1.59 in first-quarter 2019. This year-over-year upside was driven by a solid top-line performance.

Total Revenues

In the quarter under review, total revenues of $3,029 million increased 4.5% year over year on higher contributions from the Utilities business (up 6%). The top line, however, missed the consensus mark of $3,179 million by 4.7%.

Segment Update

San Diego Gas & Electric (SDG&E): Quarterly earnings amounted to $262 million compared with the year-ago quarter’s $176 million.

Southern California Gas Company (SoCalGas): In this segment, quarterly earnings totaled $303 million in the first quarter of 2020 compared with $264 million reported in the prior-year quarter.

Sempra Texas Utility: Earnings in this segment came in at $105 million in the reported quarter compared with $94 million in the year-ago quarter.

Sempra Mexico: The segment recorded net earnings of $191 million compared with $57 million in the year-ago quarter.

Sempra LNG: The segment reported earnings of $75 million compared with the year-ago quarter’s $5 million.

Parent and Other: Quarterly loss at this division increased to $248 million from the year-ago quarter’s loss of $117 million.

Financial Update

As of Mar 31, 2020, Sempra Energy’s cash and cash equivalents totaled $2,247 million compared with $108 million, as of Dec 31, 2019.

Long-term debt and finance leases amounted to $20,198 million, as of Mar 31, 2020, compared with $20,785 million at 2019-end.

Cash flow from operating activities was $1,318 million at the end of first-quarter 2020, up from $951 million at the end of first-quarter 2019.

In the reported quarter, the company’s capital expenditures, investments and acquisitions summed $1,096 million compared with $877 million in the first quarter of 2019.

2020 Guidance

Sempra Energy reaffirmed its adjusted EPS guidance for 2020. The company expects to generate earnings of $6.70-$7.50 per share. The Zacks Consensus Estimate for full-year earnings stands at $7.17 per share, 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 estimates review.

VGM Scores

At this time, Sempra has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 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 #2 (Buy). We expect an above average return from the stock in the next few months.



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