On Thursday, Sempra Energy (NYSE:SRE) received a new Buy rating from Jefferies, accompanied by a price target set at $98.00. The firm highlighted Sempra's underappreciated growth potential, noting that the company's shares have been lagging behind the Utilities Select Sector SPDR Fund (XLU) by 15% year-to-date.
Jefferies pointed out that Sempra is expected to achieve a 9% earnings per share (EPS) compound annual growth rate (CAGR) from 2024 to 2028. This projection surpasses both the company's own management target of 6-8% and the 7.5% consensus estimate.
The firm's analysis suggests that Sempra's high growth profile is largely due to its operations in Oncor and the liquefied natural gas (LNG) business. According to Jefferies, there is a "clear potential" for Sempra to exceed the earnings growth expectations once again.
Jefferies anticipates that Sempra will continue to outperform, maintaining a rate above the 8% guide at the top end of expectations, without any modifications to the projected range. This outlook is based on the company's current trajectory and the performance of its key business segments.
In other recent news, JPMorgan Chase (NYSE:JPM) & Co. is reportedly in discussions to re-enter the physical trading of liquefied natural gas (LNG). The bank is negotiating with several Gulf Coast projects, including the Commonwealth LNG site in Louisiana, Sempra Energy's site under construction in Texas, and an Energy Transfer (NYSE:ET) facility in Louisiana.
This move indicates a potential strategic expansion for the bank into the energy sector, specifically the LNG market.
Sempra Energy has seen significant developments in its earnings and revenue results, alongside adjustments in analyst ratings. BMO Capital Markets and Mizuho Securities have maintained positive outlooks on Sempra Energy and increased their price targets, reflecting confidence in the company's growth trajectory and regulatory environment.
Sempra reported robust earnings for Q2 2024, with an adjusted EPS of $0.89, and its subsidiary, Southern California Gas Company, issued $600 million in First Mortgage Bonds.
In addition, Guggenheim maintained its Buy rating on Sempra Energy, anticipating that there will be no change to the company's current earnings per share (EPS) guidance, despite a recent proposed decision by the California Public Utilities Commission (CPUC) recommending reductions in revenue increases for Sempra's subsidiaries.
This expectation is based on Sempra's diversified mix of regulated and unregulated business, which may provide a buffer against the proposed regulatory changes.
Sempra's management team has shown their commitment to their liquefied natural gas (LNG) strategy, despite the delay of the ECA LNG Phase 1 project until spring 2026. The company is also expanding its influence in Texas's energy infrastructure development, with Oncor's five-year capital plan set at $24 billion.
These recent developments reflect Sempra's strategic direction and its continued efforts to deliver returns to investors.
InvestingPro Insights
Sempra Energy's strong market position and growth potential, as highlighted by Jefferies, are further supported by recent data from InvestingPro. The company's market capitalization stands at $54.43 billion, reflecting its substantial presence in the utilities sector. Sempra's P/E ratio of 18.19 suggests a reasonable valuation relative to its earnings, especially considering its projected growth.
InvestingPro Tips indicate that Sempra has raised its dividend for 13 consecutive years and has maintained dividend payments for 27 consecutive years. This consistent dividend history aligns with the company's stable financial position and could be attractive to income-focused investors. Additionally, Sempra is trading near its 52-week high, which corroborates Jefferies' positive outlook on the stock.
The company's revenue for the last twelve months as of Q2 2024 was $13.48 billion, with a gross profit margin of 37.84%. While there has been a revenue decline of 20.58% over this period, Sempra's profitability and dividend consistency suggest resilience in its core operations.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 5 more InvestingPro Tips available for Sempra Energy, providing a deeper understanding of the company's financial health and market position.
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