Sempra Energy SRE benefits from systematic investments that will enhance the reliability of its operations, allowing it to serve its customers more efficiently. The company is also growing its liquid natural gas (LNG) operations to boost its footprint in the U.S. LNG market.
However, this Zacks Rank #3 (Hold) company faces risks like unfavorable valuation and vulnerability to dismal weather events.
Tailwinds Favoring SRE
Sempra has a capital investment plan of $40.4 billion for the 2024-2028 period to strengthen its infrastructure and enable the company to serve its customers more efficiently. SRE expects this systematic investment to drive rate base growth of 9% annually during the 2024-2028 period.
Sempra Energy is well-positioned with strategically located opportunities in North America as the demand for LNG continues to rise globally. The company plans to invest $9.20 billion in 2024, a major portion of which will go toward building the PA LNG Phase 1 project and the ECA LNG Phase 1 project.
Utility service providers like Sempra Energy are investing in adding more renewable energy to their portfolio to qualify for the utility-scale renewable energy market's financial, environmental, social and governance incentives. Sempra Infrastructure is currently working on the Cimarrón Wind project, a 300-megawatt wind production plant in Baja California, Mexico. The project is expected to generate energy in late 2025 and begin commercial operations in the first half of 2026.
Headwinds Faced by SRE
Investors may be concerned about the company's comparative study of its trailing 12-month Enterprise Value/Sales (EV/Sales) ratio, which paints a somewhat dismal image. The stock reportedly has a trailing 12-month EV/Sales ratio of 6.73, which is greater than the industry’s 4.62 EV/sales ratio.
The infrastructure and facilities of SRE, including ongoing and planned projects, are vulnerable to unfavorable weather, natural disasters, accidents and explosions. These events may cause power outages, disrupt project development and cause property damage to the company. Any of these events has the potential to significantly raise costs, such as those associated with upkeep or restoration, which would have an effect on the company’s operating results.
SRE Stock Price Movement
In the past six months, SRE shares have risen 15.8% compared with the industry’s growth of 13.2%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same sector are Atmos Energy Corp. ATO, IDACORP, Inc. IDA and NiSource Inc. NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atmos Energy’s long-term (three to five years) earnings growth rate is 7%. The Zacks Consensus Estimate for ATO’s fiscal 2025 EPS indicates an increase of 5% from the previous year’s reported number.
IDACORP’s long-term earnings growth rate is 8.3%. The Zacks Consensus Estimate for IDA’s 2024 EPS implies an improvement of 5.5% from that recorded in 2023.
NiSource’s long-term earnings growth rate is 7.5%. The Zacks Consensus Estimate for NI’s 2024 EPS calls for an improvement of 8.1% from the previous year’s reported number.
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