Sempra SRE
Utilities · Diversified Utilities · Synthos Deep Dive · 2026-07-03
The Overview
Sempra is a utility holding company — it owns the companies that pipe natural gas and deliver electricity to millions of homes in Southern California and Texas (through Oncor, the big Texas grid operator, and SoCalGas/SDG&E in California). When you pay your gas or power bill in those places, some of that money flows to Sempra. Regulators set the prices, so the earnings are steady and predictable — that's the appeal.
Is the stock cheap or expensive? Roughly fair. You're paying about 18 times next year's expected profit and getting a 2.8% dividend while you wait. That's a normal price for a solid utility — not a bargain, not a rip-off.
Our verdict is Watch: a fine, boring income stock, but two things hold us back from calling it a Buy. First, the company borrows a lot and spends more on building power lines and pipes than it takes in, so it leans on debt and issuing new shares. Second, operating in California means wildfire lawsuits are an ever-present risk — one bad fire season can wipe out years of steady gains.
Here's what our three scores mean in everyday terms:
- Downside Risk 6/10 (a bit above middle). The stock is calm day-to-day and the dividend is reliable, but the debt load and California fire risk mean a bad surprise could hit hard.
- Growth Quality 5/10 (average). Steady, guided ~8%-a-year profit growth — respectable for a utility, but not fast, and the returns it earns on its money are modest.
- Exponential Potential 3/10 (low). This is a slow-and-steady regulated business. It won't double quickly; that's not what it's built to do.
The one big worry: a major California wildfire tied to Sempra's equipment could create billions in liability, on top of a balance sheet that's already stretched.
Putting a number on it: our fair-value estimate is $100 against a current price of $84.32 — real upside if our numbers are right.
Our summary metrics
Low beta (0.58) & regulated cash flows, but 5.4× net-debt/EBITDA leverage, chronic negative FCF, and California wildfire tail-risk.
7–9% guided long-term EPS growth on a $65B capex plan — solid utility compounding, not fast; ROE only ~6.5% and 81% payout.
Regulated rate-base utility — no acceleration and a huge, mature cap; growth is steady but structurally bounded, not exponential.
What does “fair value” mean?
Fair value is Synthos’s estimate of what one share is worth today, based on our model of the company’s future cash generation and the risks to it. It is not a price target or a prediction of where the stock trades next quarter — it’s the price where we think risk and reward are balanced. Above it, you’re paying for outcomes better than our base case; below it, the market is offering a margin of safety.
The model’s inputs and weightings are proprietary — they’re the product. What we publish is the output, plus an independent, public-math cross-check further down the page (“Check our number”) so you can judge it for yourself.
What do the 5 tiers mean? (Core · Tactical · Watch · Hold · Avoid)
Exponential Potential
Regulated rate-base utility — no acceleration and a huge, mature cap; growth is steady but structurally bounded, not exponential.
What could take this further than the base case — and where the market may be underpricing it. Full forward-growth and acceleration math in Deeper analysis, §4 below.
Deeper analysis
Technicals, fundamentals, valuation, and the full expert-claim evidence panel — the detail behind the numbers above.
Reference table
| Street consensus | $106.4 (high $118 / low $100; 21 Buy · 5 Hold · 0 Sell) — context, not our anchor |
| Valuation | 29.7× trailing GAAP EPS · ~18× FY26E adj · ~17× FY27E · ~13× FY30E · EV/EBITDA 14.5× · EV/S 7.1× |
| Technicals | Neutral-up — $93, −6.7% off 52-wk high, just above 50/200-DMA (both ~$92), RSI 57, +22% 12-mo (SPY +21%) |
| Conviction | Low / none — 0 expert voices in the Synthos KB; call rests on fundamentals + quant |
| Position sizing | Income/defensive sleeve only, ~1–3% — a yield-and-rate-base holding, not a growth position |
What the experts actually said
No independent expert claims in the Synthos knowledge base yet for SRE — this dive is fundamentals- and technicals-driven, not panel-driven.
Price & moving averages 12 months · 50 & 200-day averages · 52-week range
Solid line = price · dashed line = 50-day average · dotted line = 200-day average · the two thin horizontal lines mark the 52-week high and low. Price above both averages is an uptrend.
Data summary: last close $84.31, 6% below the 50-day average ($90), 8% below the 200-day average ($91) — a downtrend. 15% below the 52-week high of $100, 6% above the 52-week low of $79.
Bollinger Bands 20-day average ± 2 standard deviations
The shaded band widens when the stock gets more volatile. Riding the upper edge = strong momentum (sometimes stretched); the lower edge = weak / potentially oversold.
Data summary: price $84.31 is currently inside the band (band $83–$88).
RSI (14) momentum gauge · 0–100
Above 70 (overbought zone, shaded) = overbought, below 30 (oversold zone, shaded) = oversold. Currently 42.
MACD 12 / 26 / 9 · trend & momentum
The MACD line crossing above the signal line (bars flip to the up color) = momentum turning up; crossing below (bars flip to the down color) = turning down. Bar height = the size of that gap.
Data summary: MACD is currently above its signal line by 0.09, positive momentum.
Relative performance vs S&P 500 & its sector (XLU (sector)), set to 100 a year ago
Solid = SRE · dashed = S&P 500 · dotted = XLU (sector). A rising line means it is beating that benchmark — the sector line shows whether it is a leader or laggard within its own group.
Forward revenue & earnings actual → estimate · "FY" = fiscal year, "E" = estimate
Darker bars = actual results, brighter = analyst estimates. Taller bars to the right = expected growth.
Key stats an RIA wants
1. What it is
Sempra (NYSE: SRE) is a San Diego-based energy-infrastructure holding company — one of the largest regulated utility platforms in North America. Fiscal year ends December 31. The business is now deliberately concentrated on two of the largest US state economies, Texas and California:
- Sempra Texas — an ~80% economic interest in Oncor, the largest transmission & distribution utility in Texas (3.8M customers, ~140,000 miles of line). In April 2026 the PUCT approved Oncor's base-rate settlement (~$6.97B annual revenue requirement, 9.75% authorized ROE, 56.5%/43.5% debt/equity structure) — a constructive regulatory outcome.
- Sempra California — SoCalGas (the nation's largest gas distribution utility, ~22M people served) and San Diego Gas & Electric (SDG&E) (electricity to ~3.6M people).
- Sempra Infrastructure — LNG export (Port Arthur, Cameron) and Mexico energy (IEnova/Ecogas), now being partially sold/recycled: the SI Partners and Ecogas transactions are expected to close Q2–Q3 2026, funding the utility capex plan.
Revenue mix (FY2025, from filings):
- By product/segment: Natural Gas (gathering, transportation, marketing, processing) $6.46B · Electricity $4.12B · Energy-Related Businesses $0.91B (Utilities Service Line total $11.51B of the $13.71B). The business is primarily regulated gas + electric delivery.
- By geography: United States $12.14B (~89%) · Mexico $1.57B (~11%). US-centric, with a modest Mexico (IEnova) tail.
The strategic story is simple and un-flashy: recycle capital out of infrastructure/international, plow ~$65B over 2026–2030 (95% into Texas + California utilities) into rate base, and let regulated returns compound EPS at 7–9%.
2. The expert thesis — why the panel is bullish (traceable)
There is no expert coverage of Sempra in the Synthos knowledge base. total_claims = 0; zero net-bullish voices; no cautionary voice either. No claim_id values exist to cite, and this note fabricates none.
That is itself an honest signal: the high-conviction investors and operators Synthos tracks are not talking about SRE. This is a regulated utility, not a name the "next-exponential" panel gravitates to. The verdict here is therefore fundamentals- and quant-driven only — analyst estimates (FMP), management's own guidance (SEC 8-K, half-weighted; see §9), the balance sheet, and valuation. Readers should weight this note accordingly: it carries no independent expert-breadth signal, only the numbers.
3. Synthos scores & the Bull / Base / Bear cases
The one-glance judgment — three scores, 0–10, each anchored to real metrics (not probabilities we can't honestly calibrate):
| Score | 0–10 | The read |
|---|---|---|
| Downside Risk (lower = safer) | 6 · Moderate-High | Beta 0.58 and regulated cash flows cushion the downside, but net-debt/EBITDA 5.4×, chronically negative FCF (−$6.0B FY25 on $10.6B capex), an 81% payout, and California wildfire liability are real structural flags. |
| Growth Quality | 5 · Average | Management guides 7–9% long-term EPS growth on a funded $65B rate-base plan — dependable, but ROE is only ~6.5%, ROIC ~2.7%, and growth leans on continued debt + equity issuance. |
| Exponential Potential | 3 · Low | A regulated rate-base utility: growth is steady and not accelerating, and a mature $61B cap in a capped-return model bounds the upside. Correctly low by design. |
The three cases (our own scenario model — assumptions shown; each target is a ~12–18-month fair value). We deliberately do not attach probabilities: the base case is by definition the expected path, so a weighted blend would just restate it with false precision. Cases anchor to adjusted EPS (GAAP FY25 was depressed by non-cash/FX items; the utility earns ~$4.90 adjusted).
| Case | Key assumptions | Fair value |
|---|---|---|
| Bull | Oncor rate case + Texas load growth + clean SI/Ecogas close lift results; FY27E adj EPS to top of guide ~$5.70; utility premium multiple ~21×. | ~$122 (+31%) |
| Base (our anchor) | Guidance roughly hits — FY26E adj EPS ~$5.10, FY27E ~$5.40; a durable 7–9% grower earns ~19×. | ~$100 (+7%) |
| Bear | A California wildfire event, adverse rate outcome, or equity dilution/rate-shock; FY27E adj EPS ~$4.90 and multiple de-rates to ~16× on balance-sheet stress. | ~$78 (−16%) |
Synthos fair value = the base case, ~$100 (+7%), with the full $78–$122 span as the honest range. This anchor sits just below the Street's $106.4 consensus (we treat wildfire + leverage more conservatively) and our bear undercuts the Street's $100 low. This is a tracked call — the Forecaster Scorecard grades it once it matures.
4. Exponential Potential
Synthos separates compounders (durable returns on capital) from exponentials (accelerating multi-baggers-from-here). SRE is neither a fast compounder nor an exponential — it is a steady regulated grower:
- Forward growth: EPS (adjusted) CAGR FY26E→FY30E ~8.8% ($5.11 → $7.16 consensus); revenue essentially flat-to-modest ($13.7B → ~$14.5B FY30E) — utility EPS growth comes from rate base, not sales volume.
- Acceleration (the 2nd derivative) is ~flat: guided 7–9% EPS growth is a straight line, not a curve. There is no inflection to ride — by design.
- Room to run: the TAM is capped by regulation. Rate base grows with the $65B plan, but authorized ROEs (~9.75% Oncor) cap the return on that base. A $61B utility does not multi-bag.
- Reinvestment runway: genuinely large ($65B over five years, 95% Texas/California) — the one honest growth positive — but it is funded by debt + equity issuance and asset sales, not internal FCF, which is the risk mirror-image of the runway.
Exponential Potential: Low (3/10). Own SRE for a 2.8% yield plus high-single-digit EPS growth, not for capital-appreciation acceleration. Scoring this a 5 would misrepresent a regulated utility as something it structurally is not.
5. Financials (real numbers — FMP annual/quarterly)
- Revenue: FY25 $13.71B, +5.8% (FY24 $12.96B). Utility revenue is lumpy with gas prices and asset mix; the underlying regulated base grows steadily.
- Earnings: FY25 GAAP net income to common $1.80B, GAAP EPS $2.75 — depressed by FX/inflation on Mexico monetary positions, derivative marks, and held-for-sale tax items. On an adjusted basis the run-rate is far higher: Q1'26 alone was $1.51 adjusted EPS, and FY26 adjusted guidance is $4.80–$5.30. Use adjusted for valuation; GAAP is noisy here.
- Quarterly trajectory: Q1'25 $1.44 adj → Q2 $0.89 → Q3 $1.11 → Q4 $1.28 → Q1'26 $1.51 adj EPS (+4.9% YoY). Seasonally front-loaded (winter gas).
- Margins: gross 30.6% TTM, EBITDA margin 48.8% TTM, net ~15% TTM — typical regulated-utility profile.
- Cash flow — the key tell: operating CF $4.57B FY25, but capex −$10.6B → free cash flow −$6.0B. Sempra has run negative FCF every year shown (−$2.2B to −$6.0B) because it is in a heavy build cycle. This is normal for a growth utility but means dividends + growth are funded by debt, equity, and asset sales, not self-funded cash.
- Balance sheet: total debt $36.3B, net debt $36.3B, net-debt/EBITDA ~5.4× — elevated even for a utility. Interest coverage a thin ~2.3×. Current ratio 1.7×. Investment-grade but leveraged; the SI/Ecogas asset sales are important deleveraging fuel.
6. Valuation — priced in or room?
On GAAP trailing EPS ($2.75) the stock looks expensive at ~29.7× — but that GAAP number is artificially low. On the numbers that matter (adjusted forward EPS), SRE is reasonably valued for a utility:
- Forward P/E: ~18.2× FY26E ($5.11) → ~16.9× FY27E ($5.52) → ~13.0× FY30E ($7.16). A regulated utility growing EPS 7–9% typically trades 16–19× — SRE is squarely in range, neither cheap nor rich.
- EV/EBITDA 14.5× TTM, EV/Sales 7.1× — full but not extreme for a rate-base utility with heavy PP&E.
- Dividend: $2.605/share, 2.8% yield, payout ~81% of GAAP (comfortable on adjusted). A core part of total return.
- Reverse read: at ~18× forward, the market is pricing the guided 7–9% growth to roughly hit, with the wildfire/leverage risk offsetting any premium. Little embedded optimism or pessimism.
- FMP letter rating C (overall score 2/5) and a negative-FCF/DCF score reflect the leverage + cash-burn profile — consistent with our Watch.
Street targets (context): consensus $106.4, high $118, low $100 — our $100 base FV sits at the Street's low end because we weight wildfire tail-risk and balance-sheet leverage more heavily. Fairly valued, not a bargain.
7. Technicals (from the tech block)
- Trend: neutral-to-up. $93.06 sits just above the 50-DMA ($91.92) and 200-DMA ($91.51), which are themselves nearly on top of each other — a flat, range-bound base rather than a strong trend. MACD +0.37 (marginally positive).
- Location: −6.7% off the 52-week high ($99.75), +25.5% off the 52-week low ($74.14) — mid-range, max drawdown from peak only −6.7% (low volatility, as beta 0.58 implies).
- Momentum: RSI(14) 57 — neutral, neither overbought nor oversold. No stretched-entry signal.
- Relative strength: SRE +22.2% 12-mo vs SPY +20.6% — roughly matching the market over a year, but −4.5% 3-mo vs SPY +13.7% and vs QQQ +22% — it has lagged badly the last quarter as risk appetite favored growth/tech.
- Read: technicals are inconclusive — a low-volatility base near its moving averages. No urgency to buy or sell on the chart; consistent with a "Watch."
8. Moat & competitive position
Sempra's moat is the classic regulated-utility moat: a legal/regulatory monopoly over gas and electric delivery in defined Texas and California territories, with returns set by the PUCT, CPUC, and FERC. Barriers to entry are effectively absolute within a service area — no one builds a competing grid. The durability risk is not competition but regulation (disallowed costs, ROE cuts) and catastrophe (California wildfire liability, which can pierce the regulated-return shield). Oncor's constructive April 2026 rate order (9.75% ROE) is a moat positive; the California wildfire regime is the moat's soft spot.
Peer set (utilities, market cap): NextEra $184B, National Grid $82B, AEP $75B, Dominion $61B, Entergy $53B, Vistra $51B, Xcel $51B, Exelon $49B, PSEG $41B, WEC $39B. SRE (~$61B) is a large-cap diversified utility; its Texas (Oncor) exposure and load-growth story are the differentiators vs pure gas or pure electric peers, offset by California regulatory/wildfire overhang that most peers don't carry.
9. Management, capital allocation & guidance
- Capital allocation: disciplined but capital-hungry — ~$65B five-year (2026–2030) plan, 95% into Texas + California utilities, funded by operating cash, new debt, equity issuance, and asset recycling (SI Partners + Ecogas sales expected to close Q2–Q3 2026). Dividend ($2.605, ~2.8% yield) is maintained through the build. Buybacks are minimal (a small $958M FY25 repurchase largely offset dilution). Appropriate for a growth utility, but leaves the balance sheet leveraged and FCF negative.
- Insider activity: the recent Form 4s are all routine director phantom-share awards dated 2026-07-01 (compensation, not open-market buying/selling) — no signal either way.
- Management's own guidance (the earnings-call track — half-weighted; management talks its own book): the SRE Q1'26 earnings release (SEC 8-K, filed 2026-05-07) is a real earnings release with explicit guidance. Management:
- Raised full-year 2026 GAAP EPS guidance to $4.87–$5.37;
- Affirmed full-year 2026 adjusted EPS guidance of $4.80–$5.30;
- Affirmed full-year 2027 EPS guidance of $5.10–$5.70;
- Affirmed a 7%–9% projected long-term EPS growth rate;
- Reiterated the ~$65B 2026–2030 capital plan (95% Texas/California utilities) and the Oncor rate order (~$6.97B revenue requirement, 9.75% ROE).
These are management's self-interested figures and are weighted at half. They are, however, consistent with the independent FMP analyst consensus ($5.11 FY26E, $5.52 FY27E), which raises confidence in the ~8% growth path.
10. Catalysts & what to watch
- Next earnings: 2026-08-06 (Q2'26; Street EPS ~$1.00, revenue ~$3.19B). Watch: reaffirmation of the $4.80–$5.30 adjusted guide and any equity-issuance signal.
- SI Partners + Ecogas closings (Q2–Q3 2026): proceeds are the key deleveraging/funding event — a clean close reduces balance-sheet risk; a delay or price cut is a negative.
- Oncor / Texas load growth: data-center and electrification demand in Texas is the real growth kicker; watch rate-base additions.
- California regulatory + wildfire season: any CPUC cost disallowance or wildfire ignition tied to SDG&E equipment is the biggest downside swing.
- Interest rates: as a leveraged, rate-sensitive utility with a 2.8% yield, SRE trades partly on the 10-year Treasury.
Thesis tripwires (what would change the call): a California wildfire liability event; net-debt/EBITDA rising above ~6×; a cut or freeze to the 7–9% growth guide; or a large dilutive equity raise. Any of these pushes toward Avoid; a clean deleveraging + affirmed growth could push toward Buy — Tactical.
11. Key risks
- California wildfire liability (structural): the single biggest tail-risk — SDG&E equipment-linked fires can create multi-billion-dollar liability that pierces regulated returns despite the AB1054 wildfire fund.
- Leverage + negative FCF: 5.4× net-debt/EBITDA, thin ~2.3× interest coverage, and −$6B FCF mean the growth plan depends on continued access to debt and equity markets; a rate spike or credit-market stress raises the funding cost of the whole plan.
- Equity dilution: funding a $65B plan with negative FCF implies ongoing share issuance (shares out rose from ~633M to ~653M), diluting per-share growth.
- Regulatory: CPUC/PUCT/FERC cost disallowances or ROE cuts directly hit earnings.
- Rate sensitivity: a leveraged, yield-oriented utility is exposed to rising long-term interest rates on both valuation and interest cost.
- No expert corroboration: zero KB coverage — this call has no independent conviction breadth behind it, only the fundamentals.
12. Verdict, position sizing & monitoring
Watch. Sempra is a well-run, fairly-valued regulated utility with a visible ~8% EPS growth path (management-guided and Street-corroborated), constructive Texas regulation (Oncor 9.75% ROE), and a reliable 2.8% dividend. But it is not a Buy today: at ~18× forward adjusted EPS it offers only ~7% upside to our $100 base fair value, and that thin margin sits on top of real structural risks — 5.4× leverage, chronic negative free cash flow, ongoing equity dilution, and California wildfire tail-risk. The reward doesn't clear the risk with enough room to earn a Buy, and there is no expert conviction in the KB to lean on.
- Sizing: if held, income/defensive sleeve only, ~1–3% — a yield-plus-rate-base holding, not a growth position. Better entry would be a pullback toward the low-$80s (our bear zone) for a wider margin of safety.
- Monitoring: re-underwrite on the SI/Ecogas closings, each rate-case outcome, and California fire season; formal re-score each earnings print. This verdict is logged as a tracked Synthos call as of 2026-07-03 at $93.06.
- Single biggest risk: a California wildfire liability event landing on an already-leveraged, FCF-negative balance sheet.
Provenance & disclosures
- Traceability: 0 KB claims, breadth 0 — no expert coverage exists for SRE in the Synthos knowledge base, and none is fabricated. This note is explicitly fundamentals- and quant-driven. Fabricated conviction is structurally impossible (claim-ID reconciliation; here there are no claims to cite).
- Data as-of: fundamentals 2026-03-31 (Q1'26) · estimates & prices 2026-07-02/03 · management guidance from the SEC 8-K earnings release filed 2026-05-07. Forward figures are analyst consensus (FMP) or management guidance, labeled as estimates.
- GAAP vs adjusted: FY25 GAAP EPS ($2.75) was depressed by FX/derivative/held-for-sale items; valuation uses management-adjusted EPS (~$4.90 run-rate, $4.80–$5.30 FY26 guide), consistent with FMP consensus.
- Management caveat: SRE guidance is management's own book, half-weighted by design.
- Not investment advice. Independent research, educational and informational only, never personalized. Hypothetical/forward figures are labeled; the only performance numbers Synthos will headline are the live, real-money Flagship's.
- Version: 2026-07-03. Prior versions available via the deep-dive version dropdown ("based on the info at the time").