Sempra Energy (SRE) announced its second-quarter operating earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 82 cents and the year-ago earnings of 80 cents per share.
Revenue
Total revenue of Sempra Energy at the end of second-quarter 2010 was $2,008 million versus $1,689 million in the year-ago period, reflecting a growth of 19%. Reported revenue in the quarter was also lower than the Zacks Consensus Estimate of $2,089 million by $81 million.
Operational Update
Total input costs at the end of second-quarter 2010 were $765 million versus $581 million in the year-ago period, reflecting growth of 31.7%.
Interest expenses at the end of second-quarter 2010 were $103 million versus $79 million in the year-ago period. The year-over-year increase was basically due to a surge in the long-term debt level of the company.
Net income of Sempra Energy at the end of second-quarter 2010 was $222 million versus $198 million in the year-ago quarter, reflecting growth of 12.1%.
Segmental Update
San Diego Gas & Electric: Quarterly earnings for San Diego Gas & Electric (SDG&E) were $75 million, compared with $70 million in the year-ago quarter.
Southern California Gas Company: Quarterly earnings for Southern California Gas Co. increased to $69 million from $65 million in the year-ago quarter.
Sempra Generation: Earnings from this segment were $48 million, compared with earnings of $33 million in the year-ago quarter, primarily due to the additional renewable tax credits received from new projects.
Sempra Pipelines & Storage: Quarterly earnings for Sempra Pipelines & Storage were $39 million versus a loss of $27 million in the year-ago quarter.
Sempra LNG: Sempra LNG earnings were $13 million, compared with a loss of $12 million in the second quarter of 2009. The turnaround in results during the quarter was due to higher earnings from operations.
Sempra Commodities: Earnings from this segment broke even in the second-quarter 2010 compared with earnings of $85 million in the year-ago quarter. The decline in the quarter was due to sluggish results in crude oil, oil products and natural gas, as well as higher costs incurred for employee retention.
Financial Update
Cash and cash equivalents for the six-month period ending on June 30, 2010, were $188 million versus $818 million at the end of the comparable period a year ago. The year-over-year decline can be attributable to increased expenditure on investing activities and a lower net income.
Capital expenditures at the end of second-quarter 2010 were $689 million, versus $638 million at the end of second-quarter 2009.
Long-term debts of Sempra Energy at the end of second-quarter 2010 were $7.6 billion, versus $7.5 billion at the end of 2009.
Sempra Energy has plans to resume share repurchase from third-quarter 2010, as a part of its $500 million share repurchase program.
Dividend
On July 15, 2010, the board of directors of Sempra Energy paid a dividend of 39 cents per share to shareholders of record on June 18, 2010.
Our View
We appreciate the steps taken by Sempra Energy to exit from commodity business. The company has entered into an agreement to sell a major portion of commodities business, which will generate approximately $1 billion for the company.
Sempra Energy is paying dividends consistently and is also planning to repurchase shares, thereby rewarding shareholders.
Based in San Diego, California, Sempra Energy, along with its subsidiaries, engages in the development of energy infrastructure, operation of utilities and provision of energy-related products and services to its worldwide consumers.
We have a short-term Zacks #4 Rank (Sell) and a long-term Neutral recommendation on the stock.
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