Last week, you might have seen that Sempra (NYSE:SRE) released its second-quarter result to the market. The early response was not positive, with shares down 3.6% to US$160 in the past week. It was a mildly positive result, with revenues exceeding expectations at US$3.5b, while statutory earnings per share (EPS) of US$1.77 were in line with analyst forecasts. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the recent earnings report, the consensus from 15 analysts covering Sempra is for revenues of US$13.5b in 2022, implying a noticeable 5.3% decline in sales compared to the last 12 months. Per-share earnings are expected to bounce 132% to US$8.33. In the lead-up to this report, the analysts had been modelling revenues of US$13.5b and earnings per share (EPS) of US$8.03 in 2022. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$171, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Sempra, with the most bullish analyst valuing it at US$192 and the most bearish at US$144 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Sempra is an easy business to forecast or the the analysts are all using similar assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 10% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 5.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.3% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sempra is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Sempra's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Sempra's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$171, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Sempra analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Sempra has 5 warning signs (and 2 which are a bit unpleasant) we think you should know about.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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