Sempra Investor Meetings: Texas Growth and Capex Upside Support 2030 Earnings Targets

Sempra's path to its 2030 earnings target is underpinned by accelerating capital investment in Texas, driven by structural data center load growth, and a strengthened balance sheet from imminent non-core asset sales. Near-term regulatory catalysts and manageable California wildfire risk further de-risk the equity story, supporting an Overweight rating and a $105 price target.

Evidence Chain

Texas load growth, driven by data center demand, provides a durable base for earnings expansion through 2030. The company recently increased its five-year capital expenditure plan by 17% to $65 billion, with an identified $9 billion of upside opportunities in Texas, $1.2 billion of which is tied to large commercial and industrial interconnection projects. Management signaled a material increase in large load—currently at least 38 GW—to be filed on April 1. This capex upside will directly translate into higher rate base growth at Oncor, supporting the company's 2030 EPS target trajectory.

The pending sales of non-core assets will eliminate common equity needs and improve credit metrics. The sales of the Sempra Infrastructure stake and EcoGas are progressing toward a 2Q-3Q26 close, advancing the company toward its goal of 95% regulated earnings. Following the transactions, rating agencies may lower downgrade thresholds (e.g., to 14% FFO/debt for Moody's) and remove negative watch status, with management targeting a 50-150 bps cushion above thresholds. A stronger balance sheet reduces financing risk and supports a lower cost of capital, enhancing valuation.

Regulatory clarity in Texas removes a key near-term uncertainty. A decision on the Oncor rate case settlement is expected at the PUCT's open meetings in April, with approval likely. This settlement would establish a constructive regulatory framework with the next general rate case not anticipated until April 2030. This four-year runway provides high visibility for earnings growth from the expanding Texas rate base.

California wildfire liability remains an overhang, but legislative progress could mitigate the risk later in 2026. A report from the California Earthquake Authority is due April 1, but it is expected to be informational. Meaningful legislative improvements to the wildfire fund are more likely to be finalized toward the end of the legislative session in late August, similar to the SB254 process. Any positive resolution would reduce a persistent discount applied to the stock.

Key Risks

The primary risks are unfavorable regulatory outcomes in California or Texas, future wildfires in California that could create shareholder liabilities, and execution delays in LNG infrastructure projects under construction. A failure to close the asset sales as planned could also pressure the balance sheet and delay credit rating improvements.

Valuation and Trade Implication

Our $105 price target implies approximately 10% upside from the current share price of ~$95.50. The valuation is supported by above-average rate base growth at Oncor, a de-risked balance sheet, and a clear path to 2030 targets. The stock trades at 15.9x our 2028e EPS of $6.00, which we view as attractive given the improved growth profile and reduced equity dilution risk.

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