Sempra (SRE) Down 14.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Sempra (SRE). Shares have lost about 14.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sempra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Sempra Energy (NYSE:SRE) Beats on Q4 Earnings, Misses on Revenues

Sempra Energy fourth-quarter 2019 earnings per share (EPS) came in at $1.55, which surpassed the Zacks Consensus Estimate of $1.31 by 18.3%. However, the bottom line declined 48.8% from $3.03 registered in the prior-year quarter.

The year-over-year downside can be attributed to absence of gain on sale of assets, which the company had witnessed in the year-ago comparable period.

For 2019, the company generated adjusted EPS of $6.78, up from $5.15 at the end of 2018. The full-year bottom line beat the Zacks Consensus Estimate of $6.17 by 9.9%.

Total Revenues

In the quarter under review, total revenues of $2,943 million increased 4.1% year over year on higher contributions from its Utilities (up 8.8%) business. The top line, however, missed the consensus mark of $3,084 million by 4.6%.

For 2019, Sempra Energy recorded revenues of $10.83 billion, up 7.2% from the prior year’s figure. The full-year top line, however, missed the consensus mark of $11.16 billion by 3%.

Segment Update

San Diego Gas & Electric (SDG&E): Quarterly earnings amounted to $185 million compared with the year-ago quarter’s $148 million.

Southern (NYSE:SO) California Gas Company (SoCalGas): At this segment, quarterly earnings totaled $204 million in the fourth quarter of 2019 compared with $156 million registered in the prior-year quarter.

Sempra Texas Utility: Earnings at this segment came in at $109 million in the reported quarter compared with $88 million in the year-ago quarter.

Sempra Mexico: The segment recorded net earnings of $39 million compared with $76 million in the year-ago quarter.

Sempra Renewables: The segment did not record any earnings in the fourth quarter against earnings of $382 million in the third quarter of 2018.

Sempra LNG: The segment reported loss of $19 million against the year-ago quarter’s earnings of $147 million.

Parent and Other: Quarterly loss at this division narrowed to $132 million from the year-ago quarter’s loss of $174 million.

Financial Update

As of Dec 31, 2019, Sempra Energy’s cash and cash equivalents totaled $108 million compared with $102 million as of Dec 31, 2018.

Long-term debt and finance leases amounted to $20,785 million as of Dec 31, 2019 compared with $20,903 million at 2018 end.

Cash flow from operating activities was $3,088 million at the end of 2019, down from $3,516 million at the end of 2018.

In the reported quarter, the company’s total capital expenditures, investments and acquisitions were $5,505 million compared with $13,712 million in the fourth quarter of 2018.

2020 Guidance

Sempra Energy reiterated its earnings guidance for 2020. The company continues to expect earnings of $6.70-$7.50 per share. The Zacks Consensus Estimate for full-year earnings stands at $7.10, in line with the midpoint of the projected view.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -19.08% due to these changes.

VGM Scores

Currently, Sempra has a poor Growth Score of F, a grade with the same score on the momentum front. However, 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 F. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.