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On Wednesday, Mizuho (NYSE:MFG) Securities adjusted its financial outlook for Sempra Energy (NYSE:SRE), reducing the price target from the previous $92.00 to $76.00, yet sustaining an Outperform rating on the company’s stock. Currently trading at $70.64 with a market capitalization of $44.9 billion, Sempra has demonstrated strong dividend reliability, having maintained payments for 27 consecutive years according to InvestingPro data. This price target adjustment follows Sempra Energy’s fourth-quarter earnings report and revised guidance for 2025, which did not meet the expectations of Wall Street analysts.
Sempra Energy announced revised guidance for 2025, projecting earnings to range between $4.30 and $4.70, a figure significantly lower than the anticipated $5.15 by analysts. The market had high expectations prior to the earnings call, anticipating a substantial increase in capital expenditures in Texas by 40-50%. Although the anticipated increase in capital expenditures was confirmed, the guidance for all segments was reduced.
The lowered guidance is attributed to several factors, including unfavorable rate outcomes in California, regulatory lag in the Texas market, delays in the LNG (liquefied natural gas) project build-out, and increased parent company expenses. Despite these challenges, InvestingPro analysis indicates the company maintains a FAIR financial health score of 2.32, with a P/E ratio of 15.5. Sempra’s management had previously provided a compound annual growth rate (CAGR) forecast of 6-8% based on a 2024 earnings baseline of $4.75. The new outlook sets a 2025 baseline of $4.50 with a CAGR of 7-9%.
In response to the updated guidance, Sempra Energy’s stock experienced an 18% decline, with InvestingPro’s technical analysis indicating the stock is currently in oversold territory based on RSI. While Mizuho analysts deemed the decline appropriate due to emerging concerns about the company’s ability to execute its plans effectively, the stock’s current price suggests it may be undervalued according to InvestingPro’s Fair Value model. Despite management’s confidence in achieving the higher end of their projections, Mizuho analysts have chosen to remain conservative with their estimates. For deeper insights into Sempra’s valuation and 8 additional exclusive ProTips, visit InvestingPro.
The adjustment in the price target to $76 reflects the current market multiples and takes into account the significant rebasing of earnings expectations by approximately $0.57. Mizuho’s analysts have conveyed that the new price target is a direct consequence of the recalibrated earnings forecast and recent market reactions.
In other recent news, Sempra Energy reported its fourth-quarter 2024 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company reported an EPS of $1.50, falling short of the expected $1.58, and revenue of $3.76 billion, significantly below the forecasted $4.9 billion. Following this announcement, Goldman Sachs downgraded Sempra Energy’s stock rating from Buy to Neutral, citing the company’s unexpected revision of its 2025 earnings expectations as a key factor. Analysts at Goldman Sachs set a new price target of $76.00, reflecting concerns over Sempra’s communication and execution strategy. Despite these challenges, Sempra Energy announced a new capital plan of $56 billion for 2025-2029 and projects EPS growth of 9% or higher through 2029. The company remains focused on long-term growth with substantial investments in infrastructure, particularly in high-growth regions like Texas and California. Sempra’s strategic positioning and planned infrastructure projects are expected to bolster its future performance, although near-term catalysts for significant estimate increases are lacking according to analysts.
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