Sempra (SRE) Presents New Brand at Investor Day, Ups EPS View
Sempra Energy SRE raised its 2021 earnings per share (EPS) outlook besides coming up with an updated strategy at its recently held Virtual Investor Day. The company also revealed its progress in the clean energy space.
The company has updated its brand name to “Sempra”, which will continue to trade under the ticker symbol “SRE”, while its legal company name will remain Sempra Energy. The new brand name will be effective at the New York Stock Exchange from Jul 2..
Updated Earnings View
As announced on its 2021 Virtual Investor Day, Sempra Energy currently expects to generate EPS in the range of $7.75 to $8.35 in 2021. This reflects an improvement of approximately 1% from the prior guidance of $7.67 to $8.27. The Zacks Consensus Estimate for Sempra’s 2021 earnings is currently pegged at $8.08, slightly higher than the mid-point of the company’s updated view.
For 2022, Sempra Energy revealed its EPS guidance in the range of $8.10 to $8.70. The Zacks Consensus Estimate for 2022 earnings is currently pegged at $8.53, higher than the mid-point of the company’s updated view.
Will the Upgraded Strategy Benefit Sempra?
In an attempt to become North America’s premier infrastructure company, Sempra Energy increased investment target for the 2021-2025 period to $32 billion from the earlier target of $22.5 billion.
With growing energy demand, such an expanded capital plan should boost the company’s ability to enhance its customer base, thereby bolstering its EPS outlook for 2021 and beyond.
Sempra’s business in Texas has been thriving lately, thanks to the solid growth achieved by its Oncor unit. Notably, Oncor added approximately 77,000 additional premises in 2020, reflecting the best organic growth for the company since 2007 and two times the national average. This should enable Sempra to receive enhanced revenues from its expanded customer base, thereby boosting its bottom-line growth.
Moreover, in April 2021, Sempra signed an agreement to sell a non-controlling 20% interest in Sempra Infrastructure to KKR for $3.37 billion in cash, subject to adjustments. Sale proceeds from this transaction are expected to bolster the company’s balance sheet, which it may later use to pay off its debts.
Further, in May, Sempra completed its exchange offer to acquire the outstanding shares of IEnova not owned by Sempra. Resultantly, Sempra's ownership interest in IEnova increased to 96.4%, exceeding its initial target of 95% ownership of IEnova through the exchange offer. Following this transaction, revenues and profits earned by IEnova will get added to Sempra’s account, thereby boosting the latter’s operating results.
Sempra’s Renewables Take
With the entire Utilities sector rapidly transitioning toward a carbon-free environment, Sempra Energy is leaving no stone unturned to go with the flow. Notably, in Mexico, the company is currently operating and constructing approximately 1,000 megawatts (MW) of renewables projects with a development pipeline of nearly 3 gigawatts (GW) of cross-border solar, wind and battery projects. Moreover, its SDG&E and SoCalGas units currently aim to achieve net-zero GHG emissions by 2045, as stated in the Virtual Investor Day.
Further, SoCalGas' H2 Hydrogen Home is the first project of its kind in the United States, demonstrating how carbon-free gas made from renewable electricity can be used in pure form (or as a blend) to fuel clean energy systems of the future.
What’s the Status of Other Utilities?
Like Sempra, other utilities are enhancing their renewable portfolio and have pledged to reduce fossil fuel dependence at a faster pace.
For instance, Duke Energy DUK aims to achieve net-zero carbon emissions by 2050. Xcel Energy XEL also plans to achieve 100% carbon-free electricity by 2050. Another utility, American Electric Power AEP aims to cut carbon dioxide emissions by 80% by 2050.
Zacks Rank & Price Movement
Sempra Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In a year’s time, shares of Sempra have gained 10.2% compared with the industry’s 19.3% growth.
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