On Wednesday, Goldman Sachs increased its price target on Sempra Energy (NYSE:SRE) to $88 from $87, while maintaining a Buy rating on the stock. The adjustment follows Sempra's recent fourth-quarter results, which have led to an updated earnings estimate for the company beyond 2025.
The firm acknowledged Sempra's significant capital expenditure (capex) increase in its five-year plan, amounting to approximately $8 billion, a 20% rise. This increase is largely attributed to Sempra's Texas utility, Oncor, which itself has raised its capital program by $5 billion. The firm expressed a positive outlook on the growth prospects for Oncor, citing potential for further capex related to grid resiliency and various growth opportunities.
Goldman Sachs anticipates that the increased spending will underpin an average earnings growth of 7% from 2024 to 2027 for Sempra. This forecast aligns with the company's own long-term guidance, which projects earnings growth between 6% and 8%. According to the firm's analysis, this growth trajectory supports the upward price target revision.
The firm's analyst provided a statement summarizing their stance, "We reiterate our Buy rating on Sempra and raise our 2025+ earnings estimates following 4Q results."
They further elaborated on the potential for Sempra's capital investments to yield robust growth, particularly through Oncor's expanded capital program.
In conclusion, Goldman Sachs sees a 28% total return to their new 12-month, sum-of-the-parts (SOTP) based price target for Sempra Energy, reflecting confidence in the company's investment strategy and growth potential.
InvestingPro Insights
Following the positive sentiment from Goldman Sachs, Sempra Energy's (NYSE:SRE) financial health and growth potential are further illuminated by key metrics and insights from InvestingPro. The company's commitment to its dividend is notable, having raised it for 13 consecutive years and maintained payments for an impressive 27 years. This consistency underscores the firm's financial stability and shareholder-friendly approach, aligning with the long-term growth trajectory highlighted by Goldman Sachs.
InvestingPro data reveals a market capitalization of $44.72 billion and a P/E ratio standing at 14.8, which adjusts to 16.38 for the last twelve months as of Q3 2023. This P/E ratio is considered low relative to the company's near-term earnings growth, suggesting that the stock could be undervalued. Additionally, the PEG ratio, a metric that relates the P/E ratio to earnings growth, is at an attractive 0.78 for the same period, further indicating that the stock might be a compelling choice for value-oriented investors.
On the earnings front, Sempra's sound performance is reflected by the 8 analysts who have revised their earnings projections upwards for the upcoming period. The company's profitability over the last twelve months, coupled with predictions of continued profitability this year, provides a solid foundation for the growth anticipated by Goldman Sachs.
For readers seeking to delve deeper into Sempra Energy’s financials and stock performance, InvestingPro offers additional insights, including tips on stock volatility and liquidity concerns. There are 6 more InvestingPro Tips available for Sempra Energy, which can be accessed by visiting https://www.investing.com/pro/SRE. For those interested in a comprehensive analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a wealth of data and expert analysis to inform your investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.