Sempra Energy (SRE) narrowed its earnings expectation for this year sending its share price down by 2.7% to $79.47 on May 23, 2013, at the New York Stock Exchange.
Sempra lowered the high end of its 2013 guidance range and now expects earnings of $4.30 to $4.60 per share. Earlier, it had projected earnings in the range of 4.30 to $4.80 per share.
For 2014, the company has also set its expectation between $4.25 and $4.55 per share. For 2017, Sempra anticipates earnings of $5.10 to $5.60 per share. However, its earnings guidance through 2017 does not involve any major contribution from its Cameron liquefied natural gas export project in Louisiana. The project is not expected to be operational fully until the end of 2018.
Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas.
Sempra’s first quarter 2013 top as well as bottom line results missed the Zacks Consensus Estimate, in the wake of weak earnings across its business segments except the Sempra Natural Gas unit.
Again, Sempra’s businesses are capital intensive and rely significantly on long-term debt for its capital expenditures. Additionally, the company operates in the state of California which maintains an aggressive 20%-plus renewable portfolio standard requirement. The targets are expected to further ramp up to 33% by 2020. This would entail significant investment towards renewable energy projects necessitating more funds.
However, the positives in Sempra’s story include the Sunrise Powerlink electric transmission line, ongoing installations of smart meter, substation expansions, higher utility operating margins from regulatory rate hikes, contracts to construct and own approximately $1 billion of natural gas pipelines, development of renewable power projects in the Pacific Southwest and completion of major regulatory filings for the Cameron LNG export project.
These developments would keep the momentum going for its 6%–8% earnings growth target. Sempra also plans to spend approximately $2.9 billion annually between the 2013 and 2017 time frame.
Presently, Sempra holds a Zacks Rank #2 (Buy). Other stocks worth considering are Zacks Ranked #2 (Buy) Atmos Energy Corp. (ATO) and Chesapeake Utilities Corporation (CPK) and a Zacks Ranked #1 (Strong Buy) National Fuel Gas Company (NFG).
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