Energy services holding company, Sempra Energy SRE is expected to beat expectations when it reports third-quarter 2015 earnings results before the opening bell on Nov 3, 2015.

Last quarter, Sempra Energy had recorded an 8.42% positive earnings surprise. Let’s see how things are shaping up for the second quarter.

Factors at Play

IEnova, a unit of Sempra Energy, is expected to be a major growth driver for the company over the next several years. This July, IEnova won a new CFE pipeline project with five more pipelines slated to be awarded this year. Management believes that depreciating oil prices will not affect the extent of investments in natural gas in Mexico, given that natural gas is a much cheaper fuel than oil.

Focus on renewable expansion, particularly solar and wind, will help Sempra Energy to deliver emission-free power to its customers, meet environmental mandates as well as diversify its generation fleet.

Sempra Energy appears to be well positioned, given its stable earnings from utility subsidiaries. The company continues with its systematic investments in infrastructure development projects. Apart from Sempra Energy’s $19.1 billion capital expenditure plan over the 2015–2019 timeframe, an additional $7 billion to $8 billion is apportioned for development opportunities which would bolster its long-term guidance. The company expects its earnings per share CAGR to the upper end of its stated growth range of 9% to 11% from 2014 through 2019.

Why a Likely Positive Surprise?

Our proven model shows that Sempra Energy is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to beat estimates, and Sempra Energy has the right mix.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +4.88%. This is because the Most Accurate estimate of 86 cents per share is higher than the Zacks Consensus Estimate of 82 cents. This is a meaningful indicator of a likely positive earnings surprise for the company.

Zacks Rank: Sempra Energy currently carries a Zacks Rank #3 (Hold). The combination of Sempra Energy’s Zacks Rank #3 and +4.88% ESP makes us positive of a likely earnings beat this season.

However, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

Other Stocks to Consider

Sempra Energy is not the only stock looking up this earnings season. We also see likely earnings beat coming from these three utility peers.

Piedmont Natural Gas Co. Inc. PNY has an earnings ESP of +16.67% and a Zacks Rank #3. It is scheduled to release its third-quarter earnings on Dec 22, 2015.

Ameren Corporation AEE has an earnings ESP of +1.53% and a Zacks Rank #2. It is scheduled to release its third-quarter earnings on Nov 6, 2015.

Duke Energy Corporation DUK has an earnings ESP of +0.66% and a Zacks Rank #3. It is scheduled to release its third-quarter earnings on Nov 4, 2015.

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