Barclays Upgrades Sempra Energy (SRE) to Overweight

Barclays analyst Nicholas Campanella upgraded Sempra Energy (NYSE: SRE) from Equalweight to Overweight with a price target of $101.00 (from $80.00).

The analyst comments: "We review SREs investment considerations and outlook post the September SIP Sale announcement and are upgrading shares to Overweight from Equal Weight. Recent underperformance, in our view, has created an attractive entry point for investors to gain exposure to the Oncor asset (14-15% RAB Growth) which we see putting shares asset base on-track to be ~60% Texas by the end of the decade, pro-forma the expected capital acceleration coming on the 4th quarter call. We see this announcement formally marking SRE's transition with focus on U.S. utility growth, targeting 95% utility earnings contribution starting in 2027, supported by a materially improving balance sheet and sufficient credit cushion to support accelerated Texas capital deployment. We see our EPS estimates well-north of consensus in 2026-2028 as we provide a model pro-forma the transaction, de-consoldiating SIP with our update. This puts SRE above the high end of the 7-9% EPS outlook and back within the prior 6-8% range (off 2024E $4.75) by 2027. At a 15.5x P/E, or -10% discount to large cap electric & gas utilities, we think shares skew too cheap given the EPS trajectory above the formal 7-9% LT EPS CAGR, high rate base growth, no equity issuance the next few years, and increased earnings mix towards high multiple, lower risk Texas assets."

For an analyst ratings summary and ratings history on Sempra Energy click here. For more ratings news on Sempra Energy click here.

Shares of Sempra Energy closed at $91.29 yesterday.

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