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Will Sempra Energy (SRE) Miss Earnings Estimates this Season? - Analyst Blog

Zacks Equity Research
Updated

Sempra Energy (SRE) is set to report fourth-quarter 2014 earnings on Feb 26 2015, before the market opens. Last quarter, it posted a positive earnings surprise of 13.01%. Let’s see how things are shaping up for this announcement.

Factors at Play

The company is investing in infrastructure development projects, following a systematic asset divestment strategy and focusing on renewable ventures. These are expected to act as catalysts for future performance. The company’s policy of paying dividends at regular intervals is also commendable.

The focus on renewable expansion, particularly solar and wind, will help Sempra Energy to deliver emission-free power to its customers. The company’s Sunrise Powerlink project recently achieved its 1,000 megawatt renewable energy goal.

Moreover, the gradual recovery in the California economy coupled with lower unemployment rates is expected to drive demand. California’s unemployment rate declined to 7% in Dec 2014 from 7.2% in Nov 2014 and 8.3% in Dec 2013.

However, its Southern California Gas Company (SoCalGas) unit registered lower earnings in the last two consecutive quarters on a year-over-year basis.

Earnings Whispers?

Our proven model does not conclusively show that Sempra Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The company’s Earnings ESP stands at -1.84%. This is because the Most Accurate estimate is pegged at $1.07 while the Zacks Consensus Estimate stands higher at $1.09.

Zacks Rank: Sempra Energy has a Zacks Rank #4 (Sell).  We particularly caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the utility space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

OGE Energy Corp. (OGE) has an Earnings ESP of +11.11% and a Zacks Rank #3.

Pattern Energy Group Inc. (PEGI) has an Earnings ESP of +420.00% and a Zacks Rank #3.

UIL Holdings Corporation (UIL) has an Earnings ESP of +3.23% and a Zacks Rank #3.


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SEMPRA ENERGY (SRE): Free Stock Analysis Report
 
OGE ENERGY CORP (OGE): Free Stock Analysis Report
 
UIL HOLDINGS CP (UIL): Free Stock Analysis Report
 
PATTERN ENERGY (PEGI): Free Stock Analysis Report
 
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Zacks Investment Research