8-K: Sempra Q2 2025: GAAP Earnings Dip, Adjusted Stable

Sempra reported a decline in second-quarter 2025 GAAP earnings to $0.71 per diluted share, while adjusted earnings remained stable at $0.89 per diluted share, affirming full-year guidance.

Summary

• Q2 2025 GAAP earnings were $461 million ($0.71 diluted EPS), down from $713 million ($1.12 diluted EPS) in Q2 2024.
• Q2 2025 adjusted earnings were $583 million ($0.89 diluted EPS), compared to $567 million ($0.89 diluted EPS) in Q2 2024.
• Year-to-date Q2 2025 GAAP earnings were $1,367 million ($2.09 diluted EPS), down from $1,514 million ($2.38 diluted EPS) in Q2 2024.
• Year-to-date Q2 2025 adjusted earnings were $1,525 million ($2.34 diluted EPS), up from $1,421 million ($2.24 diluted EPS) in Q2 2024.
• Total revenues for Q2 2025 were $3,000 million, a slight decrease from $3,011 million in Q2 2024.
• Total revenues for year-to-date Q2 2025 increased to $6,802 million from $6,651 million in Q2 2024.
• Capital expenditures for property, plant, and equipment increased to $4,640 million year-to-date Q2 2025 from $3,830 million in the prior year period.
• The company affirmed its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70 and its full-year 2026 EPS guidance range of $4.80 to $5.30.
• Sempra also affirmed its guidance to the high-end or above its projected long-term EPS compound annual growth rate of 7% to 9% for 2025 through 2029.

Sentiment

Score: 7

Explanation: While GAAP earnings saw a decline due to specific non-operational items, the underlying adjusted earnings remained stable or improved year-over-year. The company demonstrated strong progress on strategic initiatives, including significant capital investments in its utility segments and advancements in its LNG projects. The affirmation of robust long-term EPS growth guidance (7-9%) and favorable regulatory developments in Texas indicate a positive operational trajectory and future outlook, outweighing the GAAP headline decline.

Positives

• Adjusted earnings for Q2 2025 remained stable at $0.89 per diluted share, and year-to-date adjusted earnings increased to $2.34 per diluted share.
• Total revenues for the six months ended June 30, 2025, increased to $6,802 million from $6,651 million in the prior year.
• Significant progress was made on value creation initiatives, including the planned sale of equity at Sempra Infrastructure and the advancement of the Ecogas México sale process.
• Texas passed new legislation (House Bill 5247) introducing a Unified Tracker Mechanism, expected to reduce regulatory lag and improve earned returns on equity for qualifying utilities like Oncor.
• Oncor experienced a nearly 40% increase in active transmission point of interconnection requests, indicating strong economic growth and energy demand in Texas.
• Oncor increased premises served by almost 20,000 in Q2 2025 and built/upgraded nearly 600 circuit miles of transmission and distribution power lines.
• SDG&E was awarded an estimated $600 million of projects in the California Independent System Operator's 2024-2025 Transmission Plan.
• Sempra California utilities (SDG&E and SoCalGas) invested over $1.2 billion of capital during the quarter to modernize energy networks.
• SDG&E is pursuing initiatives to save customers nearly $300 million between 2026 and 2031 by phasing out certain non-economic regulatory programs.
• Sempra Infrastructure made progress on five significant construction projects and received non-FTA export authorization for Port Arthur LNG Phase 2 (up to 13.5 Mtpa).
• Sempra Infrastructure executed a 20-year sale and purchase agreement with JERA Co. Inc. for 1.5 Mtpa of LNG offtake from Port Arthur LNG Phase 2.
• The company affirmed its long-term EPS compound annual growth rate guidance of 7% to 9% for 2025 through 2029, targeting the high-end or above.

Negatives

• GAAP earnings for Q2 2025 decreased significantly to $461 million ($0.71 diluted EPS) from $713 million ($1.12 diluted EPS) in Q2 2024.
• Year-to-date GAAP earnings also declined to $1,367 million ($2.09 diluted EPS) from $1,514 million ($2.38 diluted EPS) in the prior year period.
• The financial results reflect a $(25) million impact from regulatory disallowances related to COVID-19 costs at Sempra California for both Q2 and year-to-date 2025.
• There was a $(97) million impact in Q2 2025 and $(89) million impact year-to-date 2025 from foreign currency and inflation on monetary positions in Mexico.
• A $(26) million income tax expense was recognized in Q2 and year-to-date 2025 due to a Mexican deferred tax liability on Ecogas México assets held for sale.

Risks

• Potential liability for damages from California wildfires, regardless of fault, and inability to recover costs from insurance, the wildfire fund, or customer rates.
• Adverse decisions, denials of cost recovery, audits, investigations, or other actions by regulatory bodies (e.g., CPUC, DOE, FERC, IRS, PUCT) and governmental jurisdictions.
• Risks associated with business development efforts, construction projects, acquisitions, and divestitures, including failure to make final investment decisions, negotiate definitive contracts, complete projects on schedule/budget, realize anticipated benefits, obtain approvals, or third parties honoring contracts.
• Changes to capital expenditure plans and their potential impact on rate base or other growth.
• Changes in trade and foreign policy, laws, and regulations, including tariffs and energy industry regulations in the U.S. and Mexico.
• Litigation, arbitration, property disputes, and other legal proceedings.
• Cybersecurity threats, including ransomware or other attacks on company systems or third-party systems.
• Availability, sufficiency, and cost of capital resources, and the ability to borrow money on favorable terms, affected by credit rating downgrades, capital market instability, fluctuating interest rates, and inflation.
• Impact on customer rates and cost of capital due to volatility in inflation, interest rates, commodity prices, tariffs, and the cost of meeting demand for lower carbon and reliable energy in California.
• Impact of climate policies, laws, rules, regulations, and trends, including actions to reduce reliance on natural gas, uncertainty for California natural gas distribution companies, and risk of non-recovery for stranded assets.
• Disruptions to operations, damage to facilities, or liability from weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, or information system outages.
• Availability of electric power, natural gas, and natural gas storage capacity, including disruptions from transmission grid or pipeline failures.
• Oncor Electric Delivery Company LLC's ability to reduce or eliminate its quarterly dividends due to regulatory and governance requirements.

Future Outlook

Sempra updated its full-year 2025 GAAP EPS guidance to $4.05 to $4.45, reflecting actual results through the second quarter. The company affirmed its full-year 2025 adjusted EPS guidance range of $4.30 to $4.70 and its full-year 2026 EPS guidance range of $4.80 to $5.30. Sempra 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. The company continues to target making a financial investment decision on Port Arthur LNG Phase 2 in 2025.

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

The filing highlights Sempra's strategic pivot towards a more utility-centric business model, aligning with broader industry trends focusing on stable, regulated assets. Legislative support in Texas, such as the Unified Tracker Mechanism, reflects a positive regulatory environment for utilities investing in infrastructure to meet growing energy demand. The continued development of LNG export capacity, exemplified by Port Arthur LNG Phase 2, positions Sempra to capitalize on global energy market demand for natural gas, particularly from North America. The company's focus on grid modernization and cost reduction initiatives in California also reflects ongoing efforts across the utility sector to enhance reliability and affordability amidst evolving energy landscapes and regulatory pressures.

Comparison to Industry Standards

• The filing does not provide specific comparisons to global benchmarks or directly comparable companies/projects.
• The company's focus on rotating capital into a more utility-centric business model aligns with a common strategy among large diversified energy companies seeking more predictable, regulated returns.
• The 7% to 9% long-term EPS compound annual growth rate guidance is competitive within the utility sector, which typically sees lower but more stable growth compared to other industries.
• The Port Arthur LNG Phase 2 project, with its 13.5 Mtpa export authorization and 1.5 Mtpa offtake agreement with JERA Co. Inc., is a significant development in the global LNG market, comparable in scale to other major LNG export projects under development in North America, such as those by Cheniere Energy or Venture Global LNG, indicating Sempra's strong position in this growing segment.

Stakeholder Impact

• Shareholders: Impacted by the mixed financial results (GAAP decline, adjusted stability/growth), progress on strategic initiatives, and affirmed long-term growth guidance.
• Customers (California): SDG&E and SoCalGas are focused on delivering safe, reliable, and affordable energy, with SDG&E pursuing initiatives to save customers nearly $300 million.
• Customers (Texas): Oncor is advancing critical infrastructure projects to increase electric reliability and meet the needs of a growing population, supporting strong economic growth.

Next Steps

• Oncor expects a final order to be issued in its comprehensive base rate review proceeding in the first quarter of 2026.
• Sempra continues to target making a financial investment decision on Port Arthur LNG Phase 2 in 2025.
• The planned sale of equity at Sempra Infrastructure and Ecogas México 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 is pending California Public Utilities Commission approval.

Key Dates

Recommendation

Despite a decline in GAAP earnings, the adjusted earnings remained stable or improved, reflecting solid operational performance. The company is making significant progress on its strategic value creation initiatives, including substantial capital investments in its utility businesses and key advancements in its Port Arthur LNG Phase 2 project, which secured a major offtake agreement. Favorable legislative and regulatory developments in Texas are expected to support future growth and returns. The affirmation of a robust long-term EPS compound annual growth rate of 7% to 9% signals strong confidence in future profitability and a disciplined rotation towards a more stable, utility-centric business model, making it an attractive long-term investment.

Keywords

Sempra, SRE, Utility, Energy Infrastructure, Financial Results, Earnings, SEC Filing, Q2 2025, Capital Expenditures, LNG, Natural Gas, Electric Utility, California, Texas, Mexico, Regulatory, Sustainability, Oncor, SDG&E, SoCalGas, Port Arthur LNG, Ecogas