Where Will Sempra Stock Be In 5 Years?

The company has a great deal going for it, whether that’s a 13-year streak of raising dividends or its low price-to-earnings ratio relative to anticipated growth.

But what does that all boil down to in terms of share price when looking out over the next half decade or so? How high could Sempra stock go?

Profitability Strong, but Revenues Disappoint

Sempra started 2024 very well, supported by strong growth in sectors like renewable energy, electric vehicles, and digital infrastructure. Management has taken advantage of the persistent trend towards electrification, helping it do very well in the core markets.

In the first quarter of fiscal 2024, which ended on March 31, Sempra’s total revenues were $3.64 billion. Earnings amounted to $801 million while earnings per share came in at $1.26 for the quarter. 

Cash and cash equivalents grew to $606 million by March 31, 2024. When you look at this compared to the $236 million it had on December 31, 2023, it is a big increase. Total assets of the company grew to $89.6 billion compared to $87.18 billion at the end of 2023.

Looking to the future, Sempra has updated its full-year 2024 GAAP earnings per share forecast, now expecting between $4.52 and $4.82 based on the first-quarter results. The leadership team stated again that adjusted EPS forecast for the whole year 2024 is likely to stay the same at between $4.60 and $4.90.

Peering beyond into 2025, Sempra reaffirmed its EPS guidance range of $4.90 to $5.25 while the long-term EPS growth rate is forecast between 6% and 8%.

How Is Sempra’s Dividend Growth?

Sempra has shown a good history of growing dividends, raising them annually for 13 years.

The company pays a dividend of $2.48 per share, giving investors an appealing annual dividend yield of 3.04%. In the last five years, Sempra’s dividends have grown at a CAGR of 5.5%. Plus, its four-year average dividend yield is 3.17%.

Recently, Sempra announced a quarterly dividend of $0.62 per common stock share, showing its steady approach to dividends. This dividend was issued on July 15, 2024, to those who owned shares at the close of business on June 27, 2024.

This regular payout emphasizes Sempra’s commitment to providing stable income to its investors and maintaining shareholders’ trust in the company’s sound financial condition.

Is Sempra Profitable?

Sempra’s profitability isn’t really in question with the trailing-12-month EBITDA margin sitting at 37.77%, eclipsing the industry average of 36.70% by about 2.9%.

Also, the company has a trailing-12-month net income margin of 21.06% is 68.1% higher than the sector’s average of 12.53%.

Plus, the company’s trailing-12-month CAPEX/Sales is 61.59%, higher by 85.7% when we see the industry average of 33.17%.

Lastly, the trailing-12-month cash from operations of $6.09 billion shows an increase of 379.2% more than the 1.27% industry average, and indicates that Sempra is greatly outperforming its industry peers.

At Sempra, the Devil is in the Details

Sempra Infrastructure, a subsidiary of Sempra, recently shared news about its Port Arthur LNG Phase 2 project in Texas. Bechtel Energy has agreed to a fixed-price EPC (engineering, procurement, and construction) contract.

This project aims to increase the worldwide supply of United States natural gas, and so strengthen Sempra’s handling of big projects. Plus, by expanding its liquid natural gas operations, Sempra has the potential to improve its market position and provide more value to shareholders.

In parallel, Sempra Infrastructure reported that it had reached a final investment decision for Cimarron’s wind project, which is the third phase of the Energía Sierra Juarez wind complex. This project has an estimated power capacity of 320 MW and has already secured a long-term agreement to sell electricity.

On another note, Sempra’s memorandum of understanding with the Japan Bank for International Cooperation signifies an important step forward. This partnership is designed to promote energy transition initiatives by focusing on liquid natural gas and hydrogen projects in both the United States and Japan.

Forging stronger connections with Japan Bank is likely to help Sempra secure more financing and establishes an important international partnership that puts the company in a strong position to take advantage of worldwide energy trends.

Combined, these efforts have the potential to create long-lasting shareholder value by exploring various energy markets and building important partnerships for future development. They are critical to the company’s long-term success and rewarding investors.

Where Will Sempra Stock Be In 5 Years?

A 5-year discounted cash flow forecast analysis pegs fair value for Sempra at $39.59 per share, suggesting material downside risk at this time.

Putting all the pieces of the puzzle together, Sempra is showing reasonable growth on the bottom line but has disappointed on the top line.

That may be about to change, though for the fiscal 2024 second quarter that ended in June, analysts suggest Sempra’s revenue will grow by 3.8% to reach $3.46 billion. EPS is expected to be $0.96, and shows an increase of 1.9% compared to last year.

Also, in the past four quarters, the company has performed better than its EPS expectations. Looking to the fiscal 2024 third-quarter ending in September, analysts expect Sempra’s revenue to rise by 9.6%, reaching $3.65 billion and believe EPS may well rise by 6.4% compared to last year, becoming $1.15.

Analysts lean positive in Sempra’s favor now with 8 of the 13 recommending the stock as a Buy. The consensus target price is $83.35 per share, which means they expect it to go up by almost 10% from its current price. The forecast appears so-so for new Sempra investors but for a greater margin of safety a pullback would be ideal.

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