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Sempra Energy Has Outperformed Peers

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Dec. 7 2018, Updated 1:10 p.m. ET

Sempra Energy

Sempra Energy (SRE), California’s largest utility by market capitalization, has stayed strong in the stock market while other California utilities have tumbled due to recent wildfires. Sempra stock has risen 11% this year, while PG&E (PCG) and Edison International (EIX) have fallen 40% and 10%, respectively. Sempra Energy is one of the fastest-growing utilities in the country, and its Oncor Electric acquisition could boost its earnings growth.

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Valuation

Sempra’s forward PE ratio is ~19x, lower than its historical five-year average of ~20x but higher than overall utilities’ 17x and PG&E’s and Edison’s 12x and 15.5x, respectively. Investors might shun PG&E despite its cheaper valuation. For more on the stock, read PG&E Stock Recovered 60% from Its Lows: What’s Next?

Target price

Analysts’ median target price of $125.50 for Sempra implies an ~8% gain on its current market price of $115.70. Of the 12 analysts tracking Sempra, five recommend “strong buy,” four recommend “buy,” and three recommend “hold.” None recommend “sell.” JPMorgan Chase raised SRE’s target price from $118 to $121 on December 3.

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