8-K: Sempra Reports Lower Third-Quarter Earnings, Adjusts Full-Year Guidance

Sempra's third-quarter 2024 earnings decreased compared to the same period last year, leading to an adjustment in full-year GAAP earnings guidance, while affirming adjusted EPS guidance.

Summary

• Sempra reported a GAAP earnings of $638 million, or $1.00 per diluted share, for the third quarter of 2024, down from $721 million, or $1.14 per diluted share, in the third quarter of 2023.
• Adjusted earnings for the third quarter of 2024 were $566 million, or $0.89 per diluted share, compared to $685 million, or $1.08 per diluted share in the same period last year.
• For the first nine months of 2024, GAAP earnings were $2.152 billion, or $3.38 per diluted share, compared to $2.293 billion, or $3.63 per diluted share, in the first nine months of 2023.
• Adjusted earnings for the first nine months of 2024 were $1.987 billion, or $3.12 per diluted share, compared to $2.201 billion, or $3.48 per diluted share, in the first nine months of 2023.
• The company has updated its full-year 2024 GAAP EPS guidance range to $4.86 to $5.16, while affirming its full-year 2024 adjusted EPS guidance range of $4.60 to $4.90.
• Sempra also affirmed its full-year 2025 EPS guidance range of $4.90 to $5.25.
• A $3 billion at-the-market (ATM) equity offering program has been put in place to support general corporate purposes.
• Sempra is affirming its projected long-term EPS growth rate of approximately 6% to 8%.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While earnings are down and GAAP guidance has been lowered, the company is affirming adjusted EPS guidance and long-term growth targets. There are also positive developments in infrastructure projects and capital investment plans.

Positives

• Sempra is focused on improving safety and operations and delivering more affordable services to customers.
• Investments in energy storage and infrastructure modernization benefited customers with minimal energy interruptions despite high-heat conditions.
• The business outlook for Oncor continues to strengthen with significantly higher levels of capital investment expected.
• Sempra Infrastructure is making progress developing projects in the U.S. Gulf and northern Mexico.
• Port Arthur LNG Phase 1 construction remains on time and on budget.
• The company is affirming its projected long-term EPS growth rate of approximately 6% to 8%.

Negatives

• Third-quarter 2024 GAAP and adjusted earnings were lower compared to the same period in 2023.
• The company has lowered its full-year 2024 GAAP EPS guidance range.
• The results for the first nine months of this year do not reflect the impact of the Sempra California general rate case decision that is pending at the California Public Utilities Commission (CPUC).
• The company experienced a $67 million negative impact from foreign currency and inflation on monetary positions in Mexico in the third quarter of 2024.

Risks

• The pending Sempra California general rate case decision at the CPUC could impact future revenues.
• The System Resiliency Plan (SRP) for Oncor is under review with the Public Utility Commission of Texas (PUCT).
• The company faces risks related to completing construction projects on schedule and budget.
• There are risks associated with obtaining third-party consents and approvals for projects.
• The company is exposed to macroeconomic trends that could change capital expenditure plans.
• Cybersecurity threats pose a risk to the company's systems and infrastructure.
• The availability and cost of capital resources could impact the company's ability to meet obligations.
• Volatility in inflation, interest rates, and commodity prices could impact customer rates and the company's ability to pass through higher costs.
• Climate policies and regulations could impact the company's operations and assets.
• Weather, natural disasters, and other events could disrupt operations and cause financial losses.

Future Outlook

Sempra is focused on executing its business plan, improving safety and operations, and delivering more affordable services. The company expects significantly higher levels of capital investment in grid expansion, modernization, and reliability. Sempra is also advancing development of its expansion projects in response to the ongoing global demand for cleaner fuels.

Management Comments

• We are pleased with our operational and financial results for the third quarter, said Jeffrey W. Martin, chairman and CEO of Sempra.
• We remain focused on executing our business plan, improving safety and operations, and delivering more affordable services to our customers.

Industry Context

The report highlights the increasing demand for electricity in Texas and the need for infrastructure investments to support this growth. The focus on LNG exports reflects the global trend towards energy security and diversification. The company's dual-coast LNG strategy positions it well in the market.

Comparison to Industry Standards

• Sempra's results are being compared to its own performance in previous periods, specifically the third quarter and first nine months of 2023.
• The report mentions Oncor's capital expenditure plans, which are significant and reflect the need for grid modernization and expansion in Texas, a trend seen across the US.
• The focus on LNG projects is in line with other major energy companies that are investing in natural gas infrastructure to meet global demand.
• The company's emphasis on safety and reliability aligns with industry standards for utility companies.

Stakeholder Impact

• Shareholders may be concerned about the lower earnings and reduced GAAP guidance, but reassured by the affirmed adjusted EPS guidance and long-term growth targets.
• Customers in California will be impacted by the pending rate case decision.
• Customers in Texas will benefit from increased investment in grid reliability and expansion.
• Employees will be impacted by the company's focus on safety and operational excellence.
• Suppliers and contractors will benefit from the increased capital expenditure plans.

Next Steps

• The company will continue to execute its business plan, focusing on safety, operations, and customer affordability.
• Oncor will provide an update on its capital plan on the next earnings call in February 2025.
• The company will continue to advance development of its expansion projects.
• The final decision on the Sempra California general rate cases is expected by the end of the year.

Key Dates

Keywords

Sempra, Earnings, Utilities, Infrastructure, LNG, Oncor, Capital Expenditures, EPS, Energy, Texas, California, Rate Case