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Why Sempra Energy Looks Strong Ahead

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Updated

Earnings

Sempra Energy’s (SRE) aggressive expansion into liquified natural gas exports could be a game changer for the utility. The company is building five LNG export terminals with a total planned capacity of 45 million tonnes per annum. According to Reuters, if Sempra Energy successfully builds these terminals, it would become the second-largest LNG exporter in the country behind Cheniere Energy. Sempra’s Train 1 at the Cameron LNG export terminal is expected to be operational by mid-2019.

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Growth outlook

US utilities have been expanding in energy, midstream, gas, and renewables for the last few years. The traditional electric operations only offered trivial growth opportunities. Sempra Energy’s revenues and net income growth have largely been flat in the last five years. The company’s Oncor acquisition last year will likely reap significant benefits for the company going forward.

Sempra Energy’s decision to sell its South American businesses early this year will likely streamline its operations and will allow more focus on domestic operations.

Sempra Energy intends to invest ~$25 billion for the next five years, which is expected to grow its rate base ~9% compounded annually through 2023. Sempra Energy’s management has given an adjusted EPS guidance range of $5.70–$6.30 per share for 2019, which represents ~8% earnings growth year-over-year. Utilities (XLU) (VPU) at large aim to grow 4%–6% annually for the next few years.

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