Sempra Energy (SRE) announced third-quarter operating earnings of $1.08 per share, in line with the Zacks Consensus Estimate and lower than the year-ago earnings of $1.27 per share.
On a reported basis, including one-time items, earnings came in at 53 cents in the reported quarter compared with $1.27 in the year-ago quarter. In the reported quarter, earnings include a 55 cent per share charge from the write-down of Sempra Energy’s investment in its joint venture with Royal Bank of Scotland Group plc (RBS), called RBS Sempra Commodities.
Revenue
Total revenue of Sempra Energy at the end of third-quarter 2010 was $2.1 billion versus $1.9 billion in the year-ago period, reflecting a growth of 14.2%. Reported revenue in the quarter was also higher than the Zacks Consensus Estimate of $1.9 billion by $214 million. The upside came from both Sempra Utilities and Sempra Global businesses. Sempra Utilities’ top line increased 10.6% to $1.6 billion year over year. Sempra Global revenue increased 26.1% to $541 million year over year.
Sempra Energy reported quarterly earnings of $131 million compared with $317 million in the year-ago quarter. However, in the reported quarter, the company digested a charge of $139 million (after-tax) from the write-down of Sempra Energy’s investment in the RBS Sempra Commodities joint venture.
Segmental Update
San DiegoGas & Electric:Quarterly earnings were $106 million, compared with $108 million in the year-ago quarter.
Southern California Gas Company: Quarterly earnings increased to $78 million from $74 million in the year-ago quarter.
Sempra Generation:Earnings from this segment were $56 million, compared with earnings of $43 million in the year-ago quarter, primarily due to the additional renewable tax credits received from new projects.
Sempra Pipelines & Storage: Quarterly earnings were $43 million versus $54 million in the year-ago quarter. The reduction was due primarily to higher tax and a write-down of the company’s investment in Argentina.
Sempra LNG: Earnings were $5 million in the reported quarter, compared with a break-even in the year-ago quarter. The improvement was due to the initiation of earnings from the Louisiana receipt terminal, which started operations in late July 2009, as well as from a major supply contract activated in September 2009. This was partially offset by the impact of lower natural gas prices and higher taxes.
Sempra Commodities: The segment recorded a loss of $134 million in the reported quarter, compared with earnings of $75 million in the year-ago quarter. However, performance in the reported period was down due to a $139 million charge for the write-down of Sempra Energy’s investment in the RBS Sempra Commodities joint venture.
Financial Update
Cash and cash equivalents on September 30, 2010, were $547 million versus $756 million at the end of the comparable period a year ago. In the first nine months of 2010, the company generated $1.6 billion from operating activities compared to $1.9 billion in the year-ago period. Long-term debt increased to more than $8 billion at the end of the reported period from $7.5 billion at the end of fiscal 2009.
Outlook
For 2010, Sempra Energy reaffirmed its prior earnings-per-share guidance of $3.15 to $3.40.
The company has a short-term Zacks #3 Rank (Hold) and a long-term Neutral recommendation.
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