Sempra's Q2 Beat Was Clean-But Is SRE Still Undervalued After Guidance?

Sempra's quarter was solid, but the valuation question is tougher

Sempra delivered Q2 adjusted EPS of $1.16 versus $0.89 a year earlier, and GAAP EPS rose to $1.21 from $0.71. It also held its 2026 adjusted EPS guidance of $4.80-$5.30 and kept its 7%-9% long-term EPS growth target. That is why the debate starts now.

Bulls see a utility still guiding firmly after a strong quarter. Bears see the market rewarding predictability with a richer multiple. In that context, "undervalued" becomes a timing question: is execution still ahead of market recognition, or has the stock already moved toward fair value for safety?

Texas and Infrastructure drove the quarter

The key issue was not the beat itself, but where the earnings came from.

The earnings mix moved toward Texas and Infrastructure

Sempra's second-quarter adjusted earnings broke down to California $297 million, Texas Utilities $346 million, Infrastructure $230 million, and Parent and Other loss of $77 million. Year over year, Texas Utilities rose from $208 million to $346 million, Infrastructure increased from $72 million to $230 million, and California improved from $259 million to $297 million.

That mix matters. More earnings from Texas and Infrastructure suggest Sempra is becoming less dependent on California alone, which can matter if investors assign different values to each growth driver.

Rate base growth is the main re-rating mechanism

Sempra says Texas is targeted to represent more than 60% of rate base by 2030. It also points to a large Oncor capital plan and identified incremental opportunities. That supports the idea that Sempra has a visible investment pipeline, not just defensive utility cash flow.

Importantly, the quarter was not powered by a revenue surge. Sempra posted revenues of $2.997 billion, which missed $3.22 billion consensus and were down 0.1% year over year. The earnings strength came from mix and lower losses at Parent and Other, not from top-line momentum.

What the guidance hold really means

Sempra kept its 2026 adjusted EPS guidance of $4.80-$5.30. The broader call also highlighted Oncor's new base rates and continued Sempra Infrastructure earnings support. Taken together, that points to steadier execution rather than a new growth spike.

That helps explain the bull case. Investors may be willing to pay for lower disruption risk and a stronger Texas-driven earnings base. It also clarifies the main risk: if the stock already trades at a premium for safety and predictability, future upside depends more on consistent delivery than on another headline beat.

What would keep the case intact

The next proof points are straightforward:

• Guidance remains consistent with a Texas-heavy earnings mix.
• Texas and Infrastructure continue supporting earnings without new timing setbacks.
• Capital-recycling milestones stay on track.

If those checkpoints hold, the current valuation can stay defensible. If they slip, the market may become less willing to reward the story.

Is Sempra still undervalued after earnings?

After this quarter, "obviously cheap" is probably too strong. A more precise label is quality utility with a visible growth tilt. Whether that makes SRE undervalued now depends on whether the market still discounts the Texas-driven earning base too much. If execution stays clean, that view can hold. If the stock keeps moving toward a premium-for-safety level, the margin of safety gets smaller.