Sempra - $SRE - Earnings Analysis: Significant capital investment in regulated utilities, especially in Texas, driving rate base growth.

Business Model

Sempra generates revenue through its three main business segments: Sempra California (natural gas and electric utilities), Sempra Texas Utilities (electric transmission and distribution), and Sempra Infrastructure (energy-related businesses, including LNG). Revenue comes from regulated utilities in California and Texas, and contracted assets in infrastructure.

Revenue Sources

• Natural gas distribution and transportation at Sempra California
• Electric transmission and distribution at Sempra California and Sempra Texas Utilities
• LNG sales and infrastructure operations at Sempra Infrastructure

Income Statement Analysis

• Total revenues increased by 7.65% from Q4 2023 to Q4 2024, driven by higher revenues across all segments.
• Operating income increased substantially from $452 million to $897 million due to improved operational performance.
• Basic EPS decreased to $1.05 from $1.17, which may be due to an increase in the number of shares outstanding.

Balance Sheet Analysis

• Total Assets increased by 10.29% from December 31, 2023 to December 31, 2024, indicating growth in the company's holdings.
• Total Equity increased by 12.28% from December 31, 2023 to December 31, 2024, showing improved financial strength.
• Total Liabilities increased by 8.10% from December 31, 2023 to December 31, 2024, indicating increased debt obligations and other liabilities.

Cash Flow Analysis

• Net cash provided by operating activities decreased by 21.08% from 2023 to 2024, potentially indicating operational inefficiencies or increased expenses.
• Net cash used in investing activities increased by 4.61% from 2023 to 2024, signaling increased investments in property, plant, and equipment.
• Net cash provided by financing activities significantly increased by 124.27% from 2023 to 2024, likely driven by increased debt and equity issuances.
• Cash, cash equivalents, and restricted cash increased substantially to $1,589 million, indicating improved liquidity.

Capital Allocation

Sempra is focused on disciplined capital allocation, primarily directed towards regulated utility investments. A record $56 billion five-year capital plan targets expanding and modernizing energy networks. Sempra plans to finance growth through operating cash flow, debt and equity issuances, and potential asset sales at Sempra Infrastructure. Dividend payouts are targeted between 50% and 60% of earnings.

Management Commentary

With the reset of our guidance in 2025, we are setting a new foundation for a decisive decade of growth.

We are also announcing a record five-year capital plan of $56 billion and raising the company’s long-term EPS growth rate to 7%-9%.

Due to recent and planned regulatory matters and the backdrop of a higher-cost environment, Sempra is revising its full-year 2025 earnings-per-common share (EPS) guidance range to $4.30 to $4.70.

Overall Sentiment: Cautiously optimistic, with an emphasis on long-term growth and strategic investments, particularly in Texas. Management acknowledges near-term challenges but expresses confidence in future performance.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.