BMO Capital Markets has maintained its Outperform rating on Sempra Energy (NYSE: NYSE:SRE) and increased its price target to $96.00 from the previous $93.00.
The adjustment follows the recent release of the Administrative Law Judge's Proposed Decision (PD) in the multi-year General Rate Cases (GRCs) for Southern California Gas Company (SoCalGas) and San Diego Gas & Electric (SDG&E), which are subsidiaries of Sempra Energy.
The PD, filed on Friday, supports approximately $1.6 billion in rate relief, which is about half of the $3.3 billion combined rate increase request from the two utilities. Although the rate relief is in line with expectations, the revenue relief may be slightly lower due to a 4% attrition rate applied.
BMO Capital's analyst views the PD favorably in comparison with other regulatory outcomes within the state. The firm has updated its earnings estimates for Sempra Energy for the years 2024 through 2028, projecting a 7.7% compound annual growth rate (CAGR) in earnings per share (EPS) over this period.
In other recent news, Sempra Energy reported robust earnings for Q2 2024, with an adjusted EPS of $0.89. Further financial developments include the issuance of $600 million in First Mortgage Bonds by its subsidiary, Southern California Gas Company. The company's board also saw a change with the resignation of director Bethany J. Mayer.
Several analyst firms have maintained positive outlooks on Sempra Energy. Guggenheim maintained its Buy rating on the company, despite a recent proposed decision by the California Public Utilities Commission (CPUC) recommending reductions in revenue increases for Sempra's subsidiaries. BMO Capital Markets and BofA Securities also maintained Outperform and Buy ratings respectively, with BMO increasing its price target to $93.
Sempra Energy is facing regulatory changes and project delays, but remains confident in its strategic direction. The company's ECA LNG Phase 1 project has been delayed until spring 2026, but it continues to expand its influence in Texas's energy infrastructure development, with Oncor's five-year capital plan set at $24 billion.
InvestingPro Insights
Sempra Energy's financial metrics and market performance align well with BMO Capital's optimistic outlook. According to InvestingPro data, Sempra is trading near its 52-week high, with a robust 29.54% total return over the past year. This performance supports BMO's decision to maintain an Outperform rating and raise the price target.
InvestingPro Tips highlight Sempra's consistent dividend growth, having raised its dividend for 13 consecutive years and maintained payments for 27 years. This track record of shareholder returns complements the company's projected earnings growth. Additionally, Sempra's P/E ratio of 18.24 suggests it's trading at a reasonable valuation relative to its near-term earnings growth potential, which aligns with BMO's positive view on the stock.
For investors seeking a deeper understanding of Sempra's financial health and growth prospects, InvestingPro offers 6 additional tips, providing a more comprehensive analysis of the company's position in the utility sector.
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