Sempra (NYSE:SRE) Q1 2025 Earnings Conference Call May 8, 2025 12:00 PM ET Company Participants Glen Donovan - SVP, Finance Jeff Martin - Chairman and CEO Karen Sedgwick - EVP and CFO Allen Nye - CEO, Oncor Caroline Winn - CEO of SDG&E Conference Call Participants Ross Fowler - Bank of America Carly Davenport - Goldman Sachs Steve Fleishman - Wolfe Research Nicholas Campanella - Barclays Julien Dumoulin-Smith - Jefferies Durgesh Chopra - Evercore ISI Anthony Crowdell - Mizuho David Arcaro - Morgan Stanley ...

Financial Data and Key Metrics Changes - The company reported Q1 2025 adjusted EPS of $1.44, an increase from $1.34 in the prior period [6][28] - Full year 2025 adjusted EPS guidance remains at $4.3 to $4.7, with 2026 EPS guidance of $4.8 to $5.3 [6] - Q1 2025 GAAP earnings were $942 million or $1.44 per share, compared to $854 million or $1.34 per share in Q1 2024 [28][29] Business Line Data and Key Metrics Changes - Sempra California contributed $88 million from higher CPUC-based operating margin, while Sempra Texas saw a decrease of $37 million in equity earnings due to higher interest and operating expenses [29] - Sempra Infrastructure reported a slight decrease of $2 million, primarily due to lower asset optimization [29] Market Data and Key Metrics Changes - In Texas, ERCOT projected peak load growth to increase to 150 gigawatts by 2030, prompting a regional transmission plan with investments estimated between $32 billion and $35 billion [13][14] - The company is well-positioned to construct a significant portion of the required transmission infrastructure in Texas [14] Company Strategy and Development Direction - The company plans to invest approximately $13 billion in energy infrastructure in 2025, with over $10 billion targeted for U.S. Utilities [8] - Initiatives include selling non-core assets and recycling capital to finance future growth, with a focus on improving regulatory compact in Texas and California [9][10] - The "Fit for 2025" campaign aims to reduce the company's cost structure and improve productivity through technology adoption, including artificial intelligence [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth opportunities and the importance of executing well in the near term [11][12] - The company is focused on delivering safe and reliable energy while enhancing affordability for customers [11][21] Other Important Information - The CPUC approved an expansion of West Side Canal battery storage, adding 100 megawatts of capacity [19] - The company is actively monitoring tariff impacts and has taken steps to mitigate risks associated with supply chain disruptions [62] Q&A Session Summary Question: Update on the SiP process and timeline - Management clarified the timeline for KKR's offer and subsequent responses, indicating an update will be provided in the Q2 call [35][36] Question: Texas growth and transmission projects - Management highlighted significant growth metrics in Texas, including a 3% increase in premise growth and a 66% increase in new transmission requests [40][41] Question: Specifics on the Fit for 2025 program - Management discussed initiatives to improve cost structure and customer service, including voluntary retirement programs and technology investments [46][48] Question: LNG project development and macroeconomic uncertainties - Management reassured that Port Arthur Phase II is on track, with strong commercial interest and ongoing development [57][60] Question: Tariff exposure and capital plan - Management indicated that tariff impacts are manageable, with most equipment sourced domestically, limiting exposure to around 2% or 3% [62][63] Question: Unified Tracker Bill in Texas - Management discussed the potential benefits of the Unified Tracker Bill and its interaction with rate case filings [69][72] Question: Wildfire fund changes in California - Management expressed optimism about potential changes to wildfire fund legislation and its implications for risk management [75][78]

Financial Data and Key Metrics Changes - The company reported Q1 2025 adjusted EPS of $1.44, an increase from $1.34 in the prior period, affirming full year 2025 adjusted EPS guidance of $4.3 to $4.7 and 2026 EPS guidance of $4.8 to $5.3 [5][27] - Q1 2025 GAAP earnings were $942 million or $1.44 per share, compared to $854 million or $1.34 per share in Q1 2024 [27][28] Business Line Data and Key Metrics Changes - Sempra California contributed $88 million from higher CPUC-based operating margin, while Sempra Texas saw a decrease of $37 million in equity earnings due to higher interest and operating expenses [28] - Sempra Infrastructure reported a slight decrease of $2 million, primarily due to lower asset optimization [28] Market Data and Key Metrics Changes - In Texas, ERCOT projected peak load growth to increase to 150 gigawatts by 2030, with significant investments proposed for the transmission grid totaling between $32 billion and $35 billion [12][13] - The legislative session in Texas is being monitored for potential beneficial impacts on the regulatory framework supporting transmission and distribution investments [14] Company Strategy and Development Direction - The company plans to invest approximately $13 billion in energy infrastructure in 2025, with over $10 billion targeted for U.S. Utilities [6] - The strategy includes selling non-core assets and recycling capital to finance future growth, with a focus on improving the regulatory compact in Texas and California [6][7] - The "Fit for 2025" campaign aims to reduce the company's cost structure and improve productivity through technology adoption, including artificial intelligence [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth opportunities and the importance of executing well in the near term to strengthen the company's value [10][11] - The management team is focused on delivering strategic initiatives that support consistent growth in earnings and cash flows [30] Other Important Information - The CPUC approved an expansion of West Side Canal battery storage, adding 100 megawatts of energy storage capacity [17] - The company is actively monitoring tariff impacts and has taken steps to mitigate risks by diversifying supplier sources and increasing domestic sourcing [60][61] Q&A Session Summary Question: Update on the SiP process and timeline - Management clarified the timeline for KKR's offer and subsequent responses, indicating an update will be provided in the Q2 call [34][36] Question: Insights on Texas growth and transmission projects - Management highlighted significant growth metrics in Texas, including a 3% increase in premise growth and a 66% increase in new transmission requests year-to-date [39][40] Question: Details on the Fit for 2025 program - Management discussed initiatives to improve cost structure and customer service, including voluntary retirement programs and technology investments [46][48] Question: LNG project development and macroeconomic uncertainties - Management reassured that Port Arthur Phase II is on track, emphasizing strong commercial interest and ongoing development progress [58][59] Question: Tariff exposure and capital plan impacts - Management indicated that tariff impacts are manageable, with most equipment sourced domestically, limiting direct impacts to around 2% or 3% of capital expenditures [60][62] Question: Unified Tracker Bill and its implications - Management discussed the potential benefits of the Unified Tracker Bill in Texas, which could streamline regulatory processes and improve credit quality [70][72] Question: Wildfire fund changes in California - Management expressed optimism about potential changes to wildfire fund legislation, emphasizing the importance of addressing wildfire risk for the company's operations [75][80]

Core Viewpoint - Sempra Energy reported strong first-quarter 2025 adjusted earnings per share (EPS) of $1.44, exceeding expectations and showing year-over-year growth [1] Financial Performance - Total revenues for Sempra Energy reached $3.80 billion, a 4.5% increase from $3.64 billion in the previous year, driven by higher contributions from Natural gas and Electric business units, although it fell short of the consensus estimate of $3.85 billion by 1.2% [2] - The company generated GAAP earnings of $1.39 per share, up from $1.26 in the first quarter of 2024 [1] Segmental Update - Sempra California reported quarterly earnings of $724 million, an increase from $582 million in the prior-year quarter [3] - Sempra Texas Utility saw a decline in earnings from $183 million to $146 million [3] - Sempra Infrastructure's earnings rose to $146 million from $131 million [3] - The Parent and Other segment reported a loss of $110 million, wider than the previous year's loss of $95 million [3] Financial Update - As of March 31, 2025, cash and cash equivalents totaled $1.74 billion, up from $1.57 billion at the end of 2024 [4] - Long-term debt and finance leases increased to $33.29 billion from $31.56 billion [4] - Cash flow from operating activities decreased from $1.85 billion in Q1 2024 to $1.48 billion in Q1 2025 [4] Guidance - Sempra Energy reaffirmed its 2025 adjusted EPS guidance of $4.30-$4.70, with the Zacks Consensus Estimate at $4.69 per share [5] - The company expects 2026 earnings to be in the range of $4.80-$5.30 per share, with the consensus estimate at $5.17 per share [5] - The long-term EPS growth rate is now expected to be at the high end or above the previously projected range of 7-9% through 2029 [6] Zacks Rank - Sempra currently holds a Zacks Rank of 4 (Sell) [7]

Financial Performance - Sempra reported Q1 2025 GAAP earnings of $906 million or $1.39 per diluted share, up from $801 million or $1.26 per diluted share in Q1 2024, representing a 13.1% increase in earnings [3]. - Adjusted earnings for Q1 2025 were $942 million or $1.44 per diluted share, compared to $854 million or $1.34 per diluted share in Q1 2024, reflecting a 10.3% increase [3]. - Total revenues for Q1 2025 increased to $3,802 million, up 4.4% from $3,640 million in Q1 2024 [32]. - Net income for Q1 2025 was $919 million, compared to $881 million in Q1 2024, reflecting a growth of 4.3% [32]. - Basic earnings per common share (EPS) rose to $1.39 in Q1 2025, up from $1.27 in Q1 2024, representing a 9.4% increase [32]. - Segment earnings attributable to common shares increased to $906 million in Q1 2025, up from $801 million in Q1 2024, reflecting a growth of 13.1% [47]. - Adjusted EPS guidance for 2025 is projected to be between $4.30 and $4.70, excluding significant items [38]. - Sempra updated its full-year 2025 GAAP EPS guidance to a range of $4.25 – $4.65, and affirmed its adjusted EPS guidance range of $4.30 to $4.70 [15]. Capital Expenditures and Investments - Oncor Electric Delivery Company is executing a $36.1 billion five-year capital plan to meet growing electricity demand in Texas, which reached a winter peak demand of 80.5 GW in February 2025 [7]. - Capital expenditures for property, plant, and equipment rose to $2,336 million in Q1 2025, compared to $1,933 million in Q1 2024, an increase of 20.9% [47]. - Expenditures for investments in Sempra Texas Utilities increased significantly to $486 million in Q1 2025 from $193 million in Q1 2024, a rise of 151.8% [47]. Assets and Liabilities - Total current assets increased to $5,665 million as of March 31, 2025, compared to $5,285 million at the end of 2024, marking a 7.2% increase [42]. - Total assets reached $99,010 million as of March 31, 2025, up from $96,155 million at the end of 2024, indicating a growth of 3.9% [42]. - Long-term debt and finance leases increased to $33,286 million as of March 31, 2025, compared to $31,558 million at the end of 2024 [44]. - Cash and cash equivalents rose to $1,739 million as of March 31, 2025, compared to $1,565 million at the end of 2024, an increase of 11.1% [42]. - Cash, cash equivalents, and restricted cash increased to $1,762 million as of March 31, 2025, compared to $834 million as of March 31, 2024, a growth of 111.5% [46]. Operational Metrics - Oncor had approximately 1,100 active transmission point of interconnection requests, a 35% increase compared to Q1 2024, and served nearly 19,000 additional premises in the first quarter [8]. - Total gas customer meters for Sempra California increased to 7,122 thousand in Q1 2025 from 7,089 thousand in Q1 2024, a growth of 0.5% [49]. - Total electric customer meters for Sempra California rose to 1,535 thousand in Q1 2025, up from 1,522 thousand in Q1 2024, an increase of 0.9% [49]. - Total deliveries of electric sales (millions of kWhs) decreased to 4,147 million in Q1 2025 from 4,104 million in Q1 2024, a slight decline of 1.0% [49]. Future Plans and Guidance - Sempra announced plans to sell Ecogas México and a minority stake in Sempra Infrastructure Partners, expected to be accretive to earnings per share over the next 12-18 months [20][21]. - The company is committed to a long-term EPS compound annual growth rate of 7% to 9% for the period from 2025 to 2029 [15]. Cash Flow and Financial Activities - Total cash provided by operating activities decreased to $1,482 million in Q1 2025 from $1,851 million in Q1 2024, a decline of 19.9% [46]. - Net cash used in investing activities increased to $2,785 million in Q1 2025 from $2,107 million in Q1 2024, reflecting a rise of 32.1% [46]. - The company reported a $35 million net unrealized loss on commodity derivatives for Q1 2025 [40]. - The company experienced a $8 million impact from foreign currency and inflation on its monetary positions in Mexico [40].

Group 1: Earnings Performance - Sempra reported quarterly earnings of $1.44 per share, exceeding the Zacks Consensus Estimate of $1.21 per share, and up from $1.34 per share a year ago, representing an earnings surprise of 19.01% [1] - The company posted revenues of $3.8 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 1.20%, compared to year-ago revenues of $3.64 billion [2] - Over the last four quarters, Sempra has surpassed consensus EPS estimates only once and has not beaten consensus revenue estimates during the same period [2] Group 2: Stock Performance and Outlook - Sempra shares have declined approximately 13.5% since the beginning of the year, while the S&P 500 has decreased by -4.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.81 on revenues of $3.24 billion, and for the current fiscal year, it is $4.69 on revenues of $16.67 billion [7] - The estimate revisions trend for Sempra is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Group 3: Industry Context - The Utility - Gas Distribution industry, to which Sempra belongs, is currently in the top 14% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Q1 2025 adjusted EPS was $1.44, compared to $1.34 in Q1 2024[15] - The company is affirming FY 2025 adjusted EPS guidance range of $4.30 - $4.70[15] - The company is affirming FY 2026 EPS guidance range of $4.80 - $5.30[15] - The company is guiding to the high-end or above the projected EPS CAGR of 7% – 9% for 2025 through 2029[15] Strategic Initiatives - The company plans to invest $13 billion this year, prioritizing utility investments and improved returns[10] - The company initiated a process to sell a 15% – 30% minority interest in Sempra Infrastructure Partners[21] - The company initiated a process to sell Ecogas, a natural gas distribution utility in Northern Mexico[21] Business Updates - ERCOT set a new all-time winter peak demand of 80.5 GW[21] - SDGE and SoCalGas filed 2026 – 2028 cost of capital applications[21] - CA Climate Credit to reduce customers' bills in April by as much as $136 at SDGE and $87 at SoCalGas[21]

Financial Performance - Sempra reported first-quarter 2025 GAAP earnings of $906 million or $1.39 per diluted share, an increase from $801 million or $1.26 per diluted share in the same period of 2024 [1][3] - Adjusted earnings for the first quarter of 2025 were $942 million or $1.44 per diluted share, compared to $854 million or $1.34 per diluted share in 2024 [1][3] Strategic Initiatives - The company is focused on delivering strong financial performance while progressing on strategic initiatives aimed at providing safer and more reliable energy to nearly 40 million consumers [2][4] - Sempra's Texas subsidiary, Oncor, is executing a $36.1 billion five-year capital plan to meet the growing electricity demand in Texas, which saw a new all-time winter peak demand of 80.5 gigawatts in February 2025 [4][5] Infrastructure Development - Oncor had approximately 1,100 active transmission point of interconnection requests at the end of Q1 2025, representing a 35% increase compared to the end of Q1 2024 [5] - The company is advancing critical transmission and distribution infrastructure projects to support population growth and reliability in Texas [5][6] Regulatory and Market Developments - In March 2025, San Diego Gas & Electric and Southern California Gas filed applications to update their costs of capital for 2026 to 2028, with a decision expected by the end of the year [8][9] - The California Public Utilities Commission approved the expansion of SDGE's energy storage facility, adding 100 megawatts of capacity [9] Earnings Guidance - Sempra updated its full-year 2025 GAAP EPS guidance range to $4.25 – $4.65 and affirmed its adjusted EPS guidance range of $4.30 to $4.70 [12][31] - The company expects to achieve a long-term EPS compound annual growth rate of 7% to 9% for the period from 2025 to 2029 [12] Value Creation Initiatives - Sempra reiterated its five value creation initiatives aimed at simplifying its business model and improving financial performance [14][15] - The company plans to sell Ecogas México and a minority stake in Sempra Infrastructure Partners, which are expected to be accretive to earnings [15][16]

Sempra Energy (SRE) is scheduled to release its first-quarter 2025 results on May 8, before market open.The company delivered a negative earnings surprise of 7.98% in the last reported quarter. Moreover, SRE has a negative four-quarter average earnings surprise of 7.01%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)Let’s discuss the factors that are likely to be reflected in the upcoming quarterly results.Factors at Play Ahead of SRE’s Q1 ResultsThe majority of SRE’s service terr ...

Company Overview - Sempra is expected to report quarterly earnings of $1.21 per share, reflecting a year-over-year decline of 9.7% [3] - Revenues are anticipated to reach $3.85 billion, which is a 5.7% increase from the previous year [3] Earnings Estimates and Revisions - The consensus EPS estimate has been revised down by 22.86% over the last 30 days, indicating a reassessment by analysts [4] - The Most Accurate Estimate for Sempra is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +11.05% [10][11] Earnings Surprise Prediction - A positive Earnings ESP reading suggests a potential earnings beat, particularly when combined with a strong Zacks Rank [8] - Despite the positive Earnings ESP, Sempra currently holds a Zacks Rank of 4, making it challenging to predict an earnings beat conclusively [11] Historical Performance - In the last reported quarter, Sempra was expected to post earnings of $1.63 per share but delivered only $1.50, resulting in a surprise of -7.98% [12] - The company has not surpassed consensus EPS estimates in any of the last four quarters [13] Industry Context - In comparison, Southwest Gas is expected to report earnings of $1.61 per share, indicating a year-over-year increase of 17.5% [17] - Southwest Gas has seen its consensus EPS estimate revised up by 11.6% over the last 30 days, but it has a negative Earnings ESP of -1.44% [18]