Sempra Energy (SRE) announced its first-quarter 2011 earnings of $1.07 per share surpassing the Zacks Consensus Estimate of $1.02 and the year-ago quarterly earnings of 42 cents per share.

Operating Statistics

Total revenue of Sempra Energy in the first-quarter 2011 was $2.4 billion versus $2.5 billion in the year-ago period, reflecting a fall of 3.9%. Reported revenue in the quarter was also lower than the Zacks Consensus Estimate by $23 million. The downside came from both Sempra Utilities and Sempra Global businesses.

Sempra Utilities’ top line decreased 1.6% to $1.9 billion year over year. Sempra Global revenue decreased 11.1% to $553 million year over year. Sempra Energy reported quarterly earnings of $258 million up from $106 million in the year-ago quarter.

Segment Update

San Diego Gas & Electric: Quarterly earnings for San Diego Gas & Electric (SDG&E) were $89 million, compared with $83 million in the year-ago quarter. In the reported period SDG&E signed six new renewable energy contracts together amounting to more than 700 megawatts.

Southern California Gas Company: Quarterly earnings for Southern California Gas Co. increased to $68 million from $65 million in the year-ago quarter.

Sempra Generation: Earnings from this segment were $44 million, compared with a loss of $51 million in the year-ago quarter. However year-ago quarterly results include an $84 million after-tax charge related to a litigation settlement. Also performance in the reported quarter was boosted by lower operating and maintenance costs.

Sempra Pipelines & Storage: Quarterly earnings for Sempra Pipelines & Storage were $54 million versus $38 million in the year-ago quarter. The upside was primarily due to additional earnings from the Mexican pipeline assets acquired in April 2010 and higher operating results from its utilities in Chile and Peru.

Sempra LNG: Sempra LNG earnings were $33 million in the reported quarter, compared with $32 million in the year-ago quarter.

Financial Update

Cash and cash equivalents on March 31, 2011, were $1.2 billion versus $912 million at fiscal-end 2010. In the reported quarter the company generated $805 million from operating activities compared to $888 million generated in the year-ago period. Long-term debt increased to approximately $9.2 billion at the end of the reported period from $9 billion at the end of fiscal 2010.


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 Energy’s diversified basket of businesses insulates its operations to a significant degree from regulatory rate risks, compared to integrated utility peers.

We believe that Sempra Energy presents a lower risk profile relative to its peers, supported by stable utility earnings, steady progress at its LNG terminals and Sunrise Powerlink transmission line, ongoing installation of smart meter and renewable power projects in the Pacific Southwest.

We have a short-term Zacks #3 Rank (Hold) and a long-term Neutral recommendation on the stock. In the near term, we would advise investors to accumulate its short-term Zacks #2 Rank (Buy rating) peers like Chesapeake (CPK) and Gas Natural Inc. (EGAS).

CHESAPEAKE UTIL (CPK): Free Stock Analysis Report
SEMPRA ENERGY (SRE): Free Stock Analysis Report
Zacks Investment Research