Sempra Beat on Earnings, but Is $84 SRE Really Undervalued After Guidance?

Sempra looked stronger in Q2, but the stock still sparks a valuation debate

Sempra looks underappreciated rather than plainly cheap. The quarter produced a 14.9% EPS surprise and $1.16 per diluted share on adjusted terms, yet the stock still trades at 28.79x earnings and sits near $84.37, below its $100.32 52-week high. That captures the debate: bulls see a company that could rerate if earnings hold up, while bears think the growth story is already partly built into the multiple.

The bull case is simple. Analysts cluster around an average price target of $104.23, with recent targets ranging from $101 to $108. That leaves room for upside, but only if Sempra can build on the second-quarter beat and show that current earnings power is durable. The cautious view is not that the business is broken; it is that investors may still be paying up too much for future growth.

Texas demand drove the beat, and management held its 2026 outlook

The quarter's headline story was not revenue. It was profitability.

Profit, not revenue, drove the beat

Sempra posted revenues of $2.997 billion, below the $3.22 billion consensus. But the bigger signal was in the segments:

• Sempra Texas Utilities: earnings rose to $346 million from $208 million a year ago.
• Sempra California: earnings increased to $297 million from $259 million.
• Sempra Infrastructure: earnings jumped to $230 million from $72 million.
• Parent and Other: posted a $77 million loss, roughly in line with the prior year.

That breakdown matters because the beat came from core operating segments rather than a one-off item, with Texas doing much of the work. Management also highlighted that Texas data-center demand is now doing the heavy lifting.

Why Oncor exposure matters

Texas is becoming more than a good quarter. If data-center and broader load growth continue to translate into regulated earnings, that can support a higher earnings base over time. Bulls also point to Sempra's significant holdings, including 80% ownership of Oncor in Texas as a way the company could benefit from continued transmission investment and electrification demand in the state.

The guidance update matters more than the revenue miss

The most important takeaway was management's confidence. Sempra maintained its FY 2026 EPS guidance of $4.80 to $5.30 and also set FY 2027 guidance at $5.10 to $5.70 despite the revenue miss. That does not guarantee upside, but it does support the case that management still sees a credible path toward the middle-to-upper end of its outlook.

Is Sempra undervalued after the update, or just early in the story?

At about $84.37 and roughly $2.93 in earnings, Sempra trades around 29x earnings. That is not cheap in an absolute sense. It is a valuation that leaves room for growth expectations.

The bullish case is not that the multiple is low. It is that investors may still be underweight the mix of regulated stability and infrastructure growth Sempra now appears to have. Analysts average $104.23, while recent coverage also referenced a valuation model target near $117.

What could support further upside

The near-term proof points are straightforward:

• Another quarter where Texas demand helps lift reported EPS.
• Clean execution against capital-plan items, including the KKR stake sale in Sempra Infrastructure is set to close this quarter.
• Continued alignment between management's guidance and actual results.

What could limit the rerating

The bear case comes back to execution and risk. Sempra still faces wildfire risk, potential LNG delays or cost overruns, and pressure from higher interest expenses and weaker Sempra Infrastructure net income. If those issues start to interfere with guidance execution, the stock may be early rather than undervalued.

For now, the evidence supports a balanced read: Sempra's business looked stronger after Q2, but at roughly 29x earnings, the stock still needs continued proof to justify a meaningful rerating.