Sempra First Quarter 2025 Earnings: EPS Beats Expectations, Revenues Lag

Sempra Energy (SRE) delivered a mixed first-quarter 2025 earnings report, showing strong earnings per share (EPS) growth but falling short of revenue expectations. While adjusted EPS surpassed forecasts, the miss on top-line growth highlights execution challenges amid macroeconomic pressures and project timing. The results underscore Sempra’s strategic focus on infrastructure investments, regulatory approvals, and portfolio simplification—key drivers of its long-term growth ambitions.

Financial Highlights: EPS Strength, Revenue Struggles

Sempra’s Q1 2025 adjusted EPS reached $1.44, up from $1.34 in the same period of 2024 and exceeding analyst estimates by $0.09. GAAP earnings rose to $1.39 per share, driven by cost management and operational efficiency. However, total revenue of $3.8 billion fell $70 million below expectations, with declines in energy-related businesses offsetting growth in natural gas and electric utilities.

The revenue shortfall stemmed from slower demand in certain segments and delayed project contributions. For instance, energy-related businesses revenue dropped 20% year-over-year to $381 million, reflecting softer market conditions. Meanwhile, natural gas and electric utilities revenue grew 12% and flat year-over-year, respectively, supported by Oncor’s Texas infrastructure investments and California’s regulatory tailwinds.

Strategic Initiatives: Infrastructure Growth and Asset Sales

Sempra remains laser-focused on its $13 billion 2025 capital expenditure plan, with over $10 billion allocated to U.S. utilities. Key projects advancing include:
- Energía Costa Azul (ECA) LNG Phase 1: 92% complete, targeting commercial operations by early 2026.
- Port Arthur LNG Phase 1: On track despite a tragic safety incident in March that claimed three lives.
- Cimarron Wind: Progressing toward power generation in late 2025 and commercial operations in mid-2026.

The company also prioritized portfolio simplification, announcing plans to divest non-core Mexican gas utility ECOgas and sell a minority stake in Sempra Infrastructure Partners (SIP). Proceeds will fund regulated utility growth, reduce reliance on equity markets, and boost credit metrics. Management emphasized robust investor interest in these assets, with SIP’s sale expected to conclude by mid-2025.

Operational and Regulatory Momentum

• Texas: Oncor’s $36.1 billion five-year capital plan is addressing record electricity demand (80.5 GW winter peak). The utility is positioned to secure a major share of Texas’ proposed $32–$35 billion transmission build-out, including a critical 765kV backbone to support industrial and data center growth.
• California: Utilities SDG&E and SoCalGas submitted cost-of-capital filings for 2026–2028, seeking returns of 11.25% and 11%, respectively. A CPUC decision is expected by year-end, with tariff adjustments and wildfire mitigation efforts aimed at improving affordability.

Risks and Challenges

Despite strong EPS growth, risks loom large:
1. Revenue Execution: The $70 million revenue miss signals potential demand volatility or project delays. Management cited macroeconomic headwinds but reaffirmed full-year EPS guidance of $4.30–$4.70.
2. Regulatory Hurdles: Texas legislative debates on transmission policies and California wildfire liability rulings could impact margins.
3. Project Risks: The Port Arthur LNG safety incident underscores operational risks, while supply chain constraints could delay LNG project timelines.
4. Economic Downturn: A slowdown in Texas’ industrial or data center sectors could pressure demand.

Conclusion: A Resilient Long-Term Play with Near-Term Risks

Sempra’s Q1 results reflect its dual-edged strategy: strong earnings growth via regulated utility investments and asset sales, but revenue execution challenges that warrant caution. The company’s reaffirmed 7–9% compound annual EPS growth target through 2029 is achievable if infrastructure projects (ECA, Port Arthur) deliver as planned and asset sales materialize.

Crucial data points support this outlook:
- Debt-to-EBITDA ratio remains within target ranges, and credit ratings are stable.
- Dividend yield of 3.4% with a 14-year growth streak signals confidence in cash flows.
- Texas and California regulatory tailwinds could unlock billions in utility rate base growth.

Investors should weigh Sempra’s long-term potential against near-term execution risks. While the stock’s post-earnings dip (0.82% to $75.86) reflects revenue concerns, its valuation—trading at 15.8x 2025E EPS—remains attractive relative to its regulated utility peers. Buy-and-hold investors focused on energy infrastructure growth may find Sempra compelling, but short-term traders should monitor Q2 updates on asset sales and regulatory approvals.

Sempra’s path to its 2029 CAGR target hinges on executing its capital plan, navigating regulatory landscapes, and mitigating project risks. For now, the EPS beat is a positive sign—but revenue execution remains the key to sustained investor confidence.