Sempra Energy (SRE) will release its third-quarter 2014 financial results before market open on Nov 4. In the prior quarter, this electric utility reported a negative earnings surprise of 2.70%. Let’s see how things are shaping up at Sempra Energy prior to this announcement.
Factors at Play
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 has been riding high on its Cameron Liquefaction Project. In Sep 2014, the Cameron LNG project received the final federal regulatory approval to export LNG to non-free-trade-agreement (FTA) countries. A Sempra Energy unit, Sempra LNG, is the prime company developing this project, which comprises three liquefaction trains with a nameplate capacity of approximately 12 million tons per annum of liquefied natural gas (LNG) or approximately 1.7 billion cubic feet per day for up to 20 years.
It is expected to create 3,000 jobs at the peak of the construction period and approximately 200 full-time jobs when fully operational. Although the federal approval was a major milestone for the company, it will only realize the benefit in the quarters to come.
Meanwhile, in Sep 2014, San Diego Gas & Electric (SDG&E), a subsidiary of Sempra Energy, reached new all-time back-to-back peak demand records of 4,781 megawatts (MW) on Sep 15 and 4,890 MW on Sep 16 owing to extreme weather conditions. The question is whether this fleeting rise in demand will spark off the Q3 earnings.
Earnings Whispers
Our proven model indicates that Sempra Energy does not have the right combination of elements to secure an earnings beat. 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. This is not the case here.
Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.20 while the Zacks Consensus Estimate is $1.23, resulting in -2.44% ESP.
Zacks Rank: Sempra Energy has a Zacks Rank #3 (Hold) which when combined with a negative ESP makes an earnings surprise prediction difficult.
We particularly caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings season.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
UGI Corp. (UGI) has an Earnings ESP of +16.67% and holds a Zacks Rank #3.
Consolidated Edison, Inc. (ED) has an Earnings ESP of +2.80% and holds a Zacks Rank #2.
Dynegy Inc. (DYN) has an Earnings ESP of +260.00% and holds a Zacks Rank #2.
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