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Sempra Energy (SRE) to Post Q4 Earnings: Is a Beat in Store?

Zacks Equity Research

Sempra Energy SRE is set to report fourth-quarter and full-year 2018 results on Feb 26, before market open.

In the last reported quarter, the company delivered a positive earnings surprise of 8.85%. Moreover, it surpassed the Zacks Consensus Estimate for earnings in two of the trailing four quarters, the average beat being 4.97%.

Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Sempra Energy is likely to beat estimates this quarter. That is because it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Sempra Energy has an Earnings ESP of +2.39%.

Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into earnings announcements.

Sempra Energy Price and EPS Surprise

Sempra Energy Price and EPS Surprise | Sempra Energy Quote

Factors at Play

In the third quarter of 2018, Sempra Energy’s Oncor acquisition contributed a solid $154 million to the company’s bottom line. This transaction is likely to boost earnings growth in the fourth quarter as well. However, higher interest expenses and costs related to this buyout might mar quarterly earnings growth to some extent.

Moreover, during the fourth quarter, Sempra Energy completed the sale of its U.S. operating solar assets, solar and battery storage development projects as well as its ownership interest in one wind facility to Consolidated Edison ED for approximately $1.6 billion in cash. We may expect the company’s cash flow statement to duly reflect the results of this divestiture in the soon-to-be-reported quarter.

Meanwhile, Sempra Energy’s service territories witnessed favorable temperature for most parts of the fourth quarter. This indicates at increased electricity demand in the region, which in turn must have provided a boost to the company’s top-line performance. The Zacks Consensus Estimate for quarterly revenues stands at $3.18 billion, mirroring an increase of 7.4% year over year.

Other Stocks That Warrant a Look

Investors can consider the following players from the same sector that have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Pacific Gas & Electric Co. PCG has an Earnings ESP of +3.23% and a Zacks Rank #3. The company is slated to report fourth-quarter 2018 results on Feb 28.

PNM Resources, Inc. PNM has an Earnings ESP of +13.43% and a Zacks Rank #3. The company is slated to report fourth-quarter 2018 results on Feb 27.

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