Sempra Energy’s Earnings Call: Mixed Outlook with Long-Term Optimism

Sempra Energy ((SRE)) has held its Q4 earnings call. Read on for the main highlights of the call.

Sempra Energy’s recent earnings call presented a mixed outlook, reflecting both optimism and challenges. The company announced robust long-term growth expectations and a substantial capital investment plan, yet it also highlighted near-term challenges such as lowered 2025 EPS guidance, regulatory hurdles, and project delays. Despite these issues, Sempra’s focus on strategic investments and growth opportunities, particularly in Texas, suggests a positive long-term trajectory.

EPS Growth Forecast Increase

Sempra has raised its projected long-term EPS growth rate to 7% to 9%, with expectations to achieve 9% or higher growth between 2025 and 2029. This optimistic forecast underscores the company’s confidence in its strategic direction and investment plans.

Record Capital Plan

Sempra announced a new record capital plan of $56 billion for 2025-2029, representing a 16% increase over the prior plan. A significant portion of this investment is focused on Texas, highlighting the region’s importance to Sempra’s growth strategy.

Dividend Increase

Sempra’s board of directors approved an increase in the company’s annualized dividend for the fifteenth consecutive year to $2.58 per share. This move reflects the company’s commitment to returning value to shareholders.

Oncor’s Strong Growth

Oncor reported a record $4.7 billion capital deployment and a 15% rate base growth. The company is preparing for a comprehensive base rate review, which is expected to strengthen its financial position and support continued growth.

Sempra Infrastructure Progress

Significant progress has been made on Sempra’s dual-basin LNG strategy, with ECA LNG Phase 1 and Port Arthur LNG Phase 1 on budget and on schedule. Port Arthur LNG Phase 2 is targeting a final investment decision in 2025, indicating ongoing commitment to infrastructure expansion.

Lowered 2025 EPS Guidance

Sempra revised its full-year 2025 EPS guidance range to $4.30 to $4.70, below prior expectations. This adjustment was due to changes in California rate cases, interest rates, commodity prices, and O&M costs.

California Rate Case Challenges

The final decision on California’s General Rate Case was less favorable than expected, impacting financial forecasts. This included a 42 basis point decrease in authorized return on equity, presenting a challenge for Sempra’s financial outlook.

Oncor’s Regulatory Lag

Oncor’s regulatory lag and higher costs have pressured its earned return on equity, leading to the decision to file a base rate review earlier than planned. This move is aimed at addressing near-term earnings pressures.

FERC Decision Impact

FERC issued an order finding SDG&E ineligible for a 50 basis point ISO adder, negatively impacting anticipated returns. This decision adds to the regulatory challenges faced by Sempra.

Delayed ECA LNG Phase 1 COD

The commercial operation date for ECA LNG Phase 1 has been delayed to spring 2026, impacting financial projections for 2025. This delay highlights the operational challenges in executing large-scale infrastructure projects.

Forward-Looking Guidance

In the fourth quarter 2024 earnings call, Sempra provided a detailed financial overview, highlighting an adjusted EPS of $4.65, slightly below the midpoint of their guidance range. For 2025, the EPS guidance was adjusted to $4.30 to $4.70, reflecting factors such as California rate case decisions and updates in interest rates, commodity prices, and O&M costs. Oncor, a critical growth driver, is preparing for a base rate review to support Texas’s rapid economic expansion. The company announced a five-year capital plan of $56 billion, with a significant portion allocated to Oncor, anticipating a 7% to 9% long-term EPS growth rate. Additionally, Sempra’s board approved an annualized dividend increase to $2.58 per share. Looking ahead, Sempra set a 2026 EPS guidance range of $4.80 to $5.30, driven by capital investments and infrastructure projects, targeting a compound annual rate-based growth of 10%.

In summary, Sempra Energy’s earnings call painted a picture of both opportunity and challenge. While the company faces near-term hurdles, its strategic investments and focus on growth, particularly in Texas, suggest a promising long-term outlook. Investors will be keenly watching how Sempra navigates these challenges and capitalizes on its growth opportunities.