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Friday, Jun 14, 2024

Sempra Has $3.3B Quarter; Stock to Split

ENERGY: EPS Growth of 6% - 8% Expected

Sempra (NYSE: SRE) marked the halfway point of its year by announcing a 2-for-1 stock split, scheduled later this month.

The corporation announced second quarter revenue of $3.3 billion and earnings slightly above analyst expectations.

Sempra – best known locally as the parent of San Diego Gas & Electric Co. – has a diversified business model combining the operation of state-regulated utilities (in California and Texas) and broader energy ventures. The latter include the export of liquefied natural gas (LNG) and the development of LNG export infrastructure under its Sempra Infrastructure Partners arm, known for short as SIP.

Targeting Aug. 21

Sempra announced its board’s decision to split its stock on Aug. 3. The corporation said the split is intended to make Sempra’s common stock more accessible to a broader base of investors.

The business will handle its stock split by distributing a 100% stock dividend. Shareholders of record today (Aug. 14) will receive one additional share for every then-held share of common stock, to be distributed after the close of trading on Aug. 21.

Shares of Sempra closed Aug. 7 at $142.42. In the last 52 weeks, shares have been trading in the range of $136.54 to $176.47.

Analysts surveyed by Yahoo Finance collectively expected Sempra’s earnings to be $1.75 per share. The business reported earnings (after one-time items) of $1.88 per share. Earnings calculated under Generally Accepted Accounting Principles, or GAAP, were $603 million or $1.91 per share.

Sempra’s revenue of $3.3 billion was down slightly from $3.5 billion in the second quarter of last year.

Sempra was able to beat analyst estimates with better-than-expected results from Southern California Gas and strength in its Sempra Infrastructure Partners business, wrote Jeremy Tonet, an analyst with J.P. Morgan Securities. “Tax benefits and regulatory awards at SoCalGas plus a smaller YoY earnings decline at SIP than modeled combined to offset lower TX results and a wider parent drag,” Tonet wrote.

Sempra owns a large stake of Oncor, an electric utility serving a large swath of Texas. Analyst Sarah Akers of Wells Fargo Securities sees potential here, writing in a research note that “SRE sees no slowdown in the TX growth engine.”

Sempra said that in the second quarter, Oncor connected 21,000 new premises to the Texas grid, constructed or upgraded roughly 575 miles of distribution lines and placed nearly $560 million of projects into service.

Load growth in California is tied in large part to electrification efforts, Akers wrote.

Simplify and SIP

In his remarks, Chairman and CEO Jeffrey W. Martin returned to a theme from previous earnings announcements about Sempra’s success in simplifying its business model. (One example of this was exiting investments in South American power companies.) Martin also said that over the last decade, company earnings per share (EPS) have exhibited a compound annual growth rate of roughly 8%. Sempra said that in the long term, EPS is expected to grow at 6% to 8%.

Jeffrey W. Martin
Chairman and CEO

The business announced on Aug. 3 that Sempra Infrastructure Partners expects to finalize its ownership stake in its Port Arthur, Texas liquefied natural gas export plant at an indirect ownership of 28%. That translates to a $1.74 billion equity investment on the part of Sempra, wrote Tonet of J.P. Morgan.

Sempra previously told shareholders it expected to own 20% to 30% of the project. The transaction is anticipated to close in the third quarter of this year, subject to regulatory approvals and closing conditions.

Sempra is also pushing back its final investment decision on whether to pursue a new phase of its Cameron LNG plant in coastal Louisiana from approximately mid-2023 to 2024.

The business said that another component of the Port Arthur project is development of the 72-mile Louisiana Connector pipeline, expected to deliver approximately 2 billion cubic feet of natural gas per day to Port Arthur LNG. Sempra may also participate in a carbon capture project tied to the Port Arthur plant.

Sempra updated its guidance in its Aug. 3 statement. Given the strength of its financial performance in the first half, the business said it expects GAAP EPS for the year to be in the range of $8.78 and $9.38. Adjusted EPS will be in the range of $8.60 to $9.20.

The company also affirmed its full-year 2024 EPS guidance range of $9.10 to $9.80.

‘Above Average’

“We believe the company will produce somewhat above-average earnings growth for the next several years based on a healthy capital spending program at its California and Texas utilities and earnings from liquefied natural gas exports,” wrote analyst Mike Doyle of Edward Jones in an Aug. 3 research note. The U.S. utilities are well-run, Doyle noted.

Being in the Golden State, however, may be less than golden.

Sempra shares are affected by California’s “somewhat uncertain regulatory treatment of utilities, coupled with wildfire risk,” he wrote.

“California regulation formerly was considered positive for utilities,” Doyle’s note continued. “That changed with the devastating wildfires in the last several years.” Even though the wildfires were not in Sempra’s territory, and Sempra is considered well-prepared, “the risk of significant losses from wildfires remains.”


CEO: Jeffrey W. Martin
BUSINESS: Energy services holding company
REVENUE: $14.4 billion in 2022; $12.9 billion in 2021
STOCK: SRE on the New York Stock Exchange
EMPLOYEES: More than 20,000 companywide
WEBSITE: www.sempra.com
CONTACT: 619-696-2000
NOTABLE: KKR is a partner in Sempra’s Port Arthur LNG export terminal


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