Sempra: Steady Business for a Volatile Market

06/16/2020 5:00 am EST


Roger Conrad

Chief Analyst/Managing Partner, Capitalist Times

Stock price volatility at Sempra Energy (SRE) contrasts sharply with the steady business performance of the diversified utility and midstream energy company, including the robust 8 percent dividend boost this spring, observes Roger Conrad, editor of Conrad's Utility Investor.

The stock has traded as high as $162 and as low as $88 this year. At the height of the market meltdown in March, Sempra management affirmed previous 2020 earnings per share guidance range of $6.70 to $7.50.

It also repeated guidance for calendar year 2021, while issuing a unit-by-unit breakdown of its $32 billion five-year CAPEX plan. And the company provided assurance of funding sources as well, including proceeds of pending sales of South American assets.

Shares plunged again in early April on worries about LNG export facilities and Moody’s announcement it may cut the company’s credit rating. But Sempra continued to prove its resistance to COVID-19 fallout, affirming multi-year guidance once again as it reported a 60 percent lift in Q1 earnings.

Impressively, all five of the company’s operating segments reported higher earnings. That included a 15-fold gain at Sempra LNG, as the Cameron facility in Louisiana ramped up contracted production.

Challenges to Sempra’s outlook the rest of the year include how well its grid and California’s new insurance arrangement hold up to upcoming fire season. The company has delayed a decision on a new US Gulf Coast LNG export facility, as Saudi Aramco apparently backed out.

But if Sempra has proven anything this year, it’s that all of its business lines are still growing regulated and fee-based contract income even under extreme circumstances. That’s the best possible assurance steady CAPEX will keep lifting earnings in line with guidance.

Investors should expect more share price volatility so long as energy prices remain unsettled. But resilient Sempra is a buy in our conservative portfolio for long-term growth and income up to $140. 

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