Sempra Energy Earnings: New Capital Investment Plan Supports Our Outlook

We are maintaining our $149 fair value estimate for Sempra Energy SRE after the company reported first-quarter operating earnings per share of $2.92 compared with $2.91 in the year-ago period. Management reaffirmed its 2023 EPS guidance of $8.60-$9.20, consistent with our expectations.

The company also reaffirmed its long-term annual earnings growth guidance of 6%-8%, in line with our 7% estimate, and announced 2024 EPS guidance of $9.10-$9.80. We are at the high end of that range.

Sempra announced a new five-year capital investment plan totaling $40 billion across its subsidiaries, consistent with our expectations. Sempra’s Texas operations will receive nearly half of this planned investment, supported by above-average customer and load growth. Investments in California will focus on safety and reliability to support the state’s aggressive clean energy transition. Across Sempra’s subsidiaries, the growth plan supports 9% rate base growth.

In Texas, the company received a final order from commissioners that included a 9.7% allowed return on equity used to set rates. This was lower than the 10.3% ROE that Sempra requested, but it was in line with our 9.8% expectation. Growth remains strong in the region, and we continue to think there is potential upside to Sempra’s announced $19 billion capital investment plan in the state.

Sempra Infrastructure reached a positive investment decision on the 10.5 million tonnes per annum Port Arthur LNG Phase 1 project, which the company had previously fully subscribed. The subsidiary has closed on $6.8 billion of project-level financing and is targeting a 25% equity ownership stake. We previously expected Sempra to move forward with the project.