Sempra Beats EPS, Gives Guidance

Zacks

Sempra Energy’s (SRE) fourth-quarter 2012 earnings per share of $1.08 beat the Zacks Consensus Estimate of 97 cents  by 11.3% but was lower than the year-ago figure by 10 cents.

The company reported GAAP earnings per share of $1.18, flat  year over year. The variance of 10 cents between GAAP and pro forma earnings per share was due to a one-time receipt of 10 cents.

In 2012, Sempra Energy posted earnings of $4.35 per share, 5.8% higher than the Zacks Consensus Estimate but lagged the 2011 results by a penny.

GAAP earnings for 2012 were $3.48 per share versus $5.51 per share in 2011. The difference between operating and GAAP numbers was due to non-cash charges of $239 million and after-tax cash receipts of $25 million.

Total Revenue

Total revenue of Sempra Energy in the fourth quarter of 2012 was $2,668 million, surpassing the year-ago number by $64 million and the Zacks Consensus Estimate by $40 million.

Full-year 2012 revenues came in at $9.6 billion, lagging the year-ago figure by 3.9% and the Zacks Consensus Estimate by 2%. The year-over-year decline in revenue was primarily due to a 29.6% decline in revenue from energy-related businesses.

Segment Update

San Diego Gas & Electric: Quarterly earnings for San Diego Gas & Electric (SDG&E) were $110 million compared with $158 million in the year-ago quarter, primarily due to higher expenses and lower revenue for wildfire insurance premiums compared with the previous year.

Southern California Gas Company (SoCalGas): The segment generated earnings of $99 million, up $20 million year over year.

Sempra South American Utilities: The segment recorded earnings of $46 million, up from $39 million in the fourth quarter of 2011.

Sempra Mexico: The segment recorded earnings of $35 million compared with $80 million last year. A change in an intercompany agreement resulted in lower earnings at Sempra Mexico and higher earnings at Sempra Natural Gas.

Sempra Renewables: The segment recorded earnings of $14 million, up from a loss of $2 million in the fourth quarter of 2011. The uptrend was primarily due to an increase in solar and wind assets.

Sempra Natural Gas: The segment recorded earnings of $19 million versus a loss of $36 million in fourth-quarter 2011. The turn to profit was driven by cash receipts due to sale of its ownership interest in the Rockies Express Pipeline and the change in the intercompany agreement with Sempra Mexico, partially offset by lower earnings from LNG marketing operations.

Financial Update

As of Dec 31, 2012, cash and cash equivalents were $475 million increasing from $252 million at the end of Dec 31, 2011.

Long-term debt increased to $11.6 billion from $10.1 billion at 2011 end.

In 2012 cash flow from operating activities was $2.02 billion, up from $1.87 billion in 2011.

Guidance

Sempra Energy expects 2013 pro forma earnings in the range of $4.30 to $4.80 per share. This earnings guidance takes into consideration the anticipated 2012 impact of the final decision in SDG&E's and SoCalGas' General Rate Cases  and 30 cents per share in higher tax expense from repatriation of dividends from international operations.

Other Company Releases

The Laclede Group Inc. (LG) reported earnings per share of $1.25 in the first quarter of fiscal 2013, which surpassed the Zacks Consensus Estimate by 14.68%.

Vectren Corporation (VVC) reported fourth quarter 2012 earnings of 52 cents per share, up 23.81% from the Zacks Consensus Estimate.

Our View

Sempra Energy ends 2012 on a strong note and remains on track to achieve compound annual earnings growth of 6% to 8%. The company has doubled its renewable energy generation portfolio and its success to win a bid to construct and own a $1 billion of natural gas pipeline in Mexico will surely help its cause.

The board of directors approved a 4.8% increase in the quarterly dividend rate to 63 cents. The increase reflects the underlying strength of the business and management’s inclination to improve shareholder value. Sempra Energy currently has a Zacks Rank #2 (Buy). Another Zacks Rank # 2 (Buy) stock Clean Energy Fuels Corp. (CLNE) is yet to release its fourth quarter 2012 results.

Based in San Diego, California, Sempra Energy, along with its subsidiaries, engages in the development of energy infrastructure, operation of utilities, and provision of energy-related products and services to its consumers. With a market cap of $18.30 billion, the company has 17,483 employees.

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