Sempra Energy (SRE) posted weak first-quarter 2010 earnings of 81 cents per share, lagging behind the Zacks Consensus Estimate by 11 cents. Also, the company’s profit fell behind the year-ago earnings per share of $1.29. Earnings were impacted by performance at the company’s commodities joint venture.
On a reported basis, including one-time items, earnings came in at 42 cents in the reported quarter, compared to $1.29 in the year-ago quarter. Earnings include a charge of 38 cents for the energy-crisis litigation settlement.
Operational Performance
Quarterly revenue increased 20.2% year over year to $2.5 billion. The upside came from both Sempra Utilities and Sempra Global segments. Sempra Utilities’ top line increased 16.4% to $1.9 billion year over year. Sempra Global revenue increased 33.5% to $622 million year over year.
Sempra Energy reported quarterly earnings of $106 million, compared with $316 million in the first quarter of 2009. However, in the reported quarter, the company digested a charge of $96 million after tax, related to the energy-crisis litigation settlement. Excluding the energy-crisis litigation charge, Sempra Energy had earnings of $202 million in the first quarter 2010.
Segmental Results
San Diego Gas & Electric: Quarterly earnings for San Diego Gas & Electric (SDG&E) were $83 million, compared with $99 million year over year. This was primarily due to higher liability insurance premiums for wildfire coverage and a tax charge resulting from the recently-enacted federal health care legislation.
Southern California Gas Company: Quarterly earnings for Southern California Gas Co. increased to $65 million from $59 million year over year. This was due to higher authorized margins and regulatory awards as well as lower bad debt expense. Improvement in the quarter was partially offset by higher taxes resulting from the recently-enacted federal health care legislation.
Sempra Generation: Sempra Generation recorded a quarterly loss of $53 million, compared with earnings of $43 million in the year-ago quarter. This was primarily due to an $84 million after-tax charge related to the energy-crisis litigation settlement, as well as scheduled major maintenance costs and associated downtime.
Sempra Pipelines & Storage: Quarterly earnings for Sempra Pipelines & Storage were $38 million, up from $37 million in the year-ago quarter.
Sempra LNG: Sempra LNG earnings were $32 million, compared with a loss of $7 million in the first quarter of 2009. This was primarily due to the start-up cost of marketing and terminal operations.
Sempra Commodities: Sempra Energy’s commodity operations recorded a quarterly loss of $5 million, compared with earnings of $114 million in the year-ago quarter. The loss was due primarily to reduced margins in oil and European natural gas marketing, as well as higher costs for employee retention and a $12 million after-tax charge related to the energy-crisis litigation settlement.
Financial Performance
Sempra Energy reported cash and cash equivalents of $222 million at the end of the reported quarter, more than double the $110 million at year-end fiscal 2009. Long-term debt increased to $7.2 billion at the end of the reported period from $7.5 billion at the end of fiscal 2009.
Outlook
Sempra Energy is expecting a break-even performance at its Commodities business and, adjusting for $96 million after-tax litigation charge in the reported quarter, revised its fiscal 2010 outlook. The company revised its earnings per share range to $3.15 – $3.40 from the previous guidance range of $4.25 – $4.50. Also, the Zacks Consensus Estimate for fiscal 2010 had cascaded in the past week, with six of the nine analysts revising estimates downward. Currently, the Zacks Consensus Estimate of $3.89 for fiscal 2010 is a tad higher than the company’s projection.
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