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Investing.com - Barclays upgraded Sempra Energy (NYSE:SRE) from Equalweight to Overweight on Monday, while raising its price target to $101.00 from $80.00. The utility giant, currently valued at $59.6 billion, has demonstrated strong momentum with a 30.4% return over the past six months and has maintained dividend payments for 28 consecutive years.
The upgrade follows Sempra’s September announcement regarding its SIP Sale, which Barclays views as marking the company’s transition toward focused U.S. utility growth. The firm expects Sempra to target 95% utility earnings contribution starting in 2027. According to InvestingPro, three analysts have recently revised their earnings upward for the upcoming period, supporting this positive outlook.
Barclays cited recent stock underperformance as creating an attractive entry point for investors to gain exposure to the Oncor asset, which has 14-15% RAB growth. The investment bank projects that Texas will represent approximately 60% of Sempra’s asset base by the end of the decade.
The firm’s EPS estimates for 2026-2028 are "well-north of consensus," putting Sempra above the high end of its 7-9% EPS outlook and back within its prior 6-8% range by 2027, based on 2024 estimated earnings of $4.75.
At a 15.5x P/E ratio, representing a 10% discount to large cap electric and gas utilities, Barclays considers Sempra shares undervalued given the company’s EPS trajectory, high rate base growth, no expected equity issuance in the next few years, and increased earnings mix toward higher multiple, lower risk Texas assets. This analysis aligns with InvestingPro’s Fair Value assessment, which suggests the stock is currently trading near its fair value. Discover more insights and 7 additional ProTips about Sempra Energy with an InvestingPro subscription, including detailed analysis in the comprehensive Pro Research Report.
In other recent news, Sempra Energy has made headlines with its strategic move to sell a 45% stake in Sempra Infrastructure Partners to KKR for $10 billion. This transaction, valued at a 13.8x EV/EBITDA forward multiple, has prompted several analysts to adjust their outlook on the company. BMO Capital raised its price target for Sempra Energy to $95, up from $88, while maintaining an Outperform rating. Similarly, Mizuho increased its price target to $93 from $86, also keeping an Outperform rating. UBS, on the other hand, reiterated its Neutral rating with an $82 price target, viewing the stake sale as a positive step in reducing funding risks for Oncor’s capital expenditures. Additionally, Evercore ISI initiated coverage on Sempra Energy with an Outperform rating and a $105 price target, citing a favorable outlook over the next 12-18 months. These developments underscore a period of significant activity and analyst interest in Sempra Energy.
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