8-K: Sempra Reports Q2 2025 Results, Affirms EPS Guidance

Sempra reported mixed second-quarter 2025 financial results with lower GAAP earnings but stable adjusted earnings, while affirming its full-year adjusted EPS guidance.

Summary

• Sempra reported second-quarter 2025 GAAP earnings of $461 million ($0.71 per diluted share), down from $713 million ($1.12 per diluted share) in Q2 2024.
• Adjusted earnings for Q2 2025 were $583 million ($0.89 per diluted share), compared to $567 million ($0.89 per diluted share) in Q2 2024.
• For the six months ended June 30, 2025, GAAP earnings were $1,367 million ($2.09 per diluted share), and adjusted earnings were $1,525 million ($2.34 per diluted share).
• The company is updating its full-year 2025 GAAP EPS guidance range to $4.05 to $4.45 and affirming its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70.
• Full-year 2026 EPS guidance of $4.80 to $5.30 was also affirmed, along with the long-term EPS compound annual growth rate of 7% to 9% for 2025 through 2029.
• Progress continues on capital recycling initiatives, including the planned sale of equity at Sempra Infrastructure and Ecogas Mexico, both now expected to close in Q2 or Q3 2026.
• Oncor Electric Delivery Company LLC (Sempra Texas) commenced using the new Unified Tracker Mechanism and filed a comprehensive base rate review, with a final order expected in Q1 2026.
• San Diego Gas & Electric Company (SDG&E) was awarded an estimated $600 million in projects by the California Independent System Operator.
• Sempra Infrastructure's Port Arthur LNG Phase 2 project received non-FTA export authorization and secured a 20-year sale and purchase agreement with JERA Co. Inc. for 1.5 Mtpa of LNG.

Sentiment

Score: 7

Explanation: The filing presents a generally positive outlook despite a decline in GAAP earnings, primarily due to non-recurring items. Adjusted earnings are stable or growing, and the company affirmed its future guidance, indicating confidence. Significant progress on strategic initiatives and infrastructure projects in key markets (Texas, California, LNG) supports long-term growth. The delay in asset sales is a minor negative, but the overall strategic direction and operational execution appear strong.

Positives

• Adjusted earnings for Q2 2025 increased to $583 million from $567 million in Q2 2024, maintaining diluted EPS at $0.89.
• Adjusted earnings for the six months ended June 30, 2025, increased to $1,525 million ($2.34 per diluted share) from $1,421 million ($2.24 per diluted share) in the prior year.
• Affirmed full-year 2025 adjusted EPS guidance range of $4.30 to $4.70 and full-year 2026 EPS guidance range of $4.80 to $5.30.
• Affirmed guidance to the high-end or above its projected long-term EPS compound annual growth rate of 7% to 9% for 2025 through 2029.
• New Texas legislation (House Bill 5247) is expected to help utilities reduce regulatory lag and improve earned returns on equity.
• Oncor has seen a nearly 40% increase in active transmission point of interconnection requests compared to Q2 2024, indicating strong demand.
• California Independent System Operator awarded an estimated $600 million of projects to San Diego Gas & Electric Company (SDG&E).
• Sempra Infrastructure's Port Arthur LNG Phase 2 project received non-FTA export authorization for up to approximately 13.5 million tonnes per annum (Mtpa) of LNG.
• Sempra Infrastructure executed a 20-year sale and purchase agreement with JERA Co. Inc. for the supply of 1.5 Mtpa of LNG from Port Arthur LNG Phase 2.

Negatives

• GAAP earnings for Q2 2025 decreased significantly to $461 million ($0.71 per diluted share) from $713 million ($1.12 per diluted share) in Q2 2024.
• GAAP earnings for the six months ended June 30, 2025, decreased to $1,367 million ($2.09 per diluted share) from $1,514 million ($2.38 per diluted share) in the prior year.
• Impact from regulatory disallowances of $25 million related to coronavirus disease 2019 (COVID-19) costs at Sempra California.
• Impact from foreign currency and inflation on monetary positions in Mexico resulted in a $97 million negative impact in Q2 2025.
• Income tax expense of $26 million in 2025 due to the recognition of a Mexican deferred tax liability on Ecogas Mxico, S. de R.L. de C.V. (Ecogas) as a result of management's decision to hold the asset for sale.

Risks

• Potential liability for damages from California wildfires, regardless of fault, and any inability to recover all or a substantial portion of costs from insurance, the wildfire fund, rates from customers, or a combination thereof.
• Adverse decisions, denials of cost recovery, audits, investigations, inquiries, ordered studies, regulations, denials or revocations of permits, consents, approvals or other authorizations, renewals of franchises, and other actions by regulatory bodies (e.g., California Public Utilities Commission, U.S. Federal Energy Regulatory Commission, Public Utility Commission of Texas) and governmental jurisdictions.
• Risks related to the success of business development efforts, construction projects, acquisitions, divestitures, and other significant transactions, including being able to make a final investment decision, negotiating pricing and other terms in definitive contracts, completing construction projects or other transactions on schedule and budget, realizing anticipated benefits, obtaining regulatory and other approvals, and third parties honoring their contracts and commitments.
• Changes to capital expenditure plans and their potential impact on rate base or other growth.
• Changes, due to evolving economic, political, and other factors, to trade and other foreign policy (including tariffs) and laws and regulations (including those related to tax and the energy industry in the U.S. and Mexico).
• Litigation, arbitration, property disputes, and other proceedings.
• Cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on systems or the systems of third parties with which business is conducted, including the energy grid or other energy infrastructure.
• The availability, uses, sufficiency, and cost of capital resources and the ability to borrow money or otherwise raise capital on favorable terms and meet obligations, which can be affected by actions by credit rating agencies to downgrade credit ratings, instability in the capital markets, and fluctuating interest rates and inflation.
• The impact on affordability of San Diego Gas & Electric Company's (SDG&E) and Southern California Gas Company's (SoCalGas) customer rates and their cost of capital, and on SDG&E's, SoCalGas', and Sempra Infrastructure's ability to pass through higher costs due to volatility in inflation, interest rates, commodity prices, tariffs, the cost of meeting the demand for lower carbon and reliable energy in California, and volatility in foreign currency exchange rates.
• The impact of climate policies, laws, rules, regulations, trends, and required disclosures, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies, the risk of nonrecovery for stranded assets, and uncertainty related to emerging technologies.
• Disruptions to operations, damage to facilities or systems, cause the release of harmful materials or fires, or subject to liability for damages, fines, and penalties due to weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages, or other events such as work stoppages, some of which may not be recoverable through regulatory mechanisms or insurance or may impact the ability to obtain satisfactory levels of affordable insurance.
• The availability of electric power, natural gas, and natural gas storage capacity, including disruptions caused by failures in the transmission grid or pipeline and storage systems or limitations on the injection and withdrawal of natural gas from storage facilities.
• Oncor Electric Delivery Company LLC's (Oncor) ability to reduce or eliminate its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor's independent directors or a minority member director.

Future Outlook

Sempra updated its full-year 2025 GAAP EPS guidance range to $4.05 to $4.45, affirmed its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70, and affirmed its full-year 2026 EPS guidance range of $4.80 to $5.30. The company also affirmed its guidance to achieve the high-end or above its projected long-term EPS compound annual growth rate of 7% to 9% for the period of 2025 through 2029.

Management Comments

• "We are pleased to report another solid quarter."
• "We remain focused on the disciplined execution of our value creation initiatives for 2025, with a view toward continuing to rotate capital into a more utility-centric business model."

Industry Context

Sempra's focus on a utility-centric business model aligns with broader industry trends towards stable, regulated assets. The progress in Texas with new legislation supporting utility investment reflects a favorable regulatory environment in a high-growth state. In California, the company continues to invest in grid modernization and reliability, addressing evolving energy demands and climate policies. The advancements in LNG export capacity through Port Arthur LNG Phase 2 position Sempra to capitalize on global energy demand, particularly for natural gas, which remains a critical transition fuel. The company's capital recycling program, though experiencing delays, aims to streamline its portfolio towards core utility operations, a common strategy among diversified energy companies seeking to optimize returns and reduce volatility.

Comparison to Industry Standards

• Oncor's nearly 40% increase in active transmission point of interconnection requests compared to Q2 2024 indicates robust demand growth in its service territory, potentially outpacing some other utility service areas.
• The California Independent System Operator's award of an estimated $600 million in projects to SDG&E highlights significant investment in grid infrastructure, comparable to large-scale utility modernization efforts seen across major U.S. states.
• The Port Arthur LNG Phase 2 project's non-FTA export authorization for 13.5 Mtpa and the 20-year sale and purchase agreement with JERA Co. Inc. for 1.5 Mtpa are significant milestones, positioning it among major global LNG export projects. For example, QatarEnergy's North Field Expansion projects are much larger, but Port Arthur LNG Phase 2 is a substantial contribution to U.S. LNG export capacity, comparable in scale to other multi-billion dollar LNG projects under development or recently completed in the U.S. Gulf Coast region.

Stakeholder Impact

• Shareholders: Potential for long-term value creation through capital recycling and a utility-centric model; stable adjusted EPS guidance; potential for increased dividends from Oncor (though Oncor can reduce them).
• Customers (California): SDG&E's efforts to save customers nearly $300 million between 2026 and 2031 by phasing out non-economic regulatory programs. Continued investment in safe, reliable, and affordable energy.
• Customers (Texas): Oncor's base rate review is intended to support continued delivery of safe, reliable electric service and meet the needs of the growing population.
• Employees: Continued investment in infrastructure projects implies ongoing work and potential for job stability/growth.
• Creditors: Higher interest expense and cost inflation mentioned in Oncor's rate request, and general risk of capital availability and cost.

Next Steps

• Sempra targets making a financial investment decision on Port Arthur LNG Phase 2 in 2025.
• Oncor expects a final order to be issued in its comprehensive base rate review proceeding in the first quarter of 2026.
• Planned sale of equity at Sempra Infrastructure and Ecogas Mexico are expected to close in the second or third quarter of 2026.
• SDG&E's effort to save customers nearly $300 million between 2026 and 2031 by phasing out certain non-economic regulatory programs is pending California Public Utilities Commission approval.

Key Dates

Recommendation

While GAAP earnings declined, adjusted earnings remained stable or improved, and the company affirmed its full-year adjusted EPS guidance and long-term growth targets. Significant progress on strategic infrastructure projects in Texas, California, and LNG export markets supports future growth. However, the delay in asset divestitures and ongoing regulatory and market risks warrant a cautious approach. The stock appears to be performing as expected, with no immediate strong catalysts for a "buy" or "sell" recommendation based solely on this filing.

Keywords

Sempra, SRE, utility, energy infrastructure, financial results, earnings, EPS guidance, capital recycling, asset sales, Port Arthur LNG, LNG export, Oncor, SDG&E, SoCalGas, Texas utilities, California utilities, natural gas, electricity, infrastructure projects, regulatory environment