Sempra Reports Strong Third-Quarter 2026 Results

Sempra reported Q3 2026 adjusted EPS of $1.40, up from $1.11 a year earlier, and GAAP EPS of $1.34 versus $0.12. It updated 2026 GAAP EPS guidance to $7.41–$8.41, guided to the high end of its $4.80–$5.30 adjusted EPS range, and affirmed 2027 EPS guidance of $5.10–$5.70 and long-term EPS growth of 7%–9%. Oncor expects its 2027–2031 base capital plan to rise about 20% from the 2026–2030 plan; a proposed California regulatory decision could leave 2027 earnings at the low end of segment guidance if not mitigated. The planned sale of a 45% stake in Sempra Infrastructure Partners to KKR affiliates remains on track to close within two weeks.

Analysis

The apparent GAAP earnings step-up is a poor read-through to recurring value: the 2026 range includes an estimated $2.0–$2.4bn Infrastructure Partners sale gain, while adjusted guidance is the cleaner operating signal. The more durable upside is a potential shift in Sempra’s earnings mix toward Texas regulated investment, but Oncor’s larger capital plan is still a forecast, not equivalent to approved rate base or near-term EPS. Its load pipeline can be discounted if ERCOT qualification, customer commitments, transmission approvals, or affordability constraints slow conversion.

The key offset is California: the proposed denial of the attrition-mechanism correction could leave 2027 California earnings at the low end of segment guidance. That makes the headline 7%–9% long-term growth target more dependent on Texas execution and successful regulatory recovery. Near term, completion of the KKR stake sale should clarify capital recycling and leverage, but reported GAAP EPS will be unusually transaction-sensitive. Financing remains a watch item: year-to-date operating cash flow is below PP&E and investment spending, so closing proceeds and debt-market access matter alongside growth.

Contrarian read: investors may overcapitalize the Texas load pipeline before it becomes earning rate base, while underweighting the value of a completed asset sale if proceeds materially improve funding flexibility. The thesis weakens if the sale slips, February’s Oncor plan fails to substantiate the projected increase, or California guidance is cut beyond the disclosed low-end risk.

Key Decisions for Investors

• SRE: do not chase the GAAP EPS headline. Consider a staged long on post-results weakness, with the sale closing and February capital-plan disclosure as confirmation points; the thesis is Texas rate-base growth plus improved funding flexibility, not the one-off earnings gain.
• Keep sizing modest until the KKR transaction closes and Sempra discloses proceeds, use of funds, and any resulting debt or credit-metric change. If closing is delayed or funding metrics deteriorate, defer the long.
• Track the CPUC outcome and 2027 California segment guidance. A further earnings reduction or failure to secure an alternative recovery path would falsify the assumption that Texas growth can offset the California drag.
• No standalone KKR position from this announcement: transaction terms, expected returns, and financing detail are insufficient to infer material KKR equity impact.