Sempra Reports Strong Second-Quarter 2026 Results

Sempra reported Q2 2026 GAAP earnings of $796 million ($1.21/diluted share) vs. $461 million ($0.71) a year earlier, and adjusted earnings of $762 million ($1.16) vs. $583 million ($0.89). The company is updating full-year 2026 GAAP EPS guidance to $5.02–$5.55 and affirming adjusted EPS of $4.80–$5.30, while reaffirming 2027 EPS guidance of $5.10–$5.70 and a 7%–9% long-term EPS growth outlook. Capital deployment remains heavy, with over $6B invested in 1H 2026 and a record 2026–2030 plan of ~$65B; regulatory progress includes FERC approval of SDGE TO6 with ~10.28% authorized base ROE and Oncor’s new base rates effective June 1 plus an Aug. 1 surcharge.

Analysis

SRE is transitioning from a story about earnings volatility to one about capital structure simplification. The KKR monetization matters less for the near-term EPS print than for removing conglomerate discount: if proceeds are recycled into the utility base or balance sheet, equity risk should migrate from project-execution skepticism toward a cleaner regulated-growth multiple. The real second-order beneficiary is the Texas grid capex ecosystem — equipment, transformers, and EPCs — because the economic value sits in accelerating rate base, not in the load-request headline itself.

The market should be careful not to capitalize the Texas demand narrative at face value. Large-load pipeline numbers are option value, not contracted cash flow, and any delay in interconnection approvals would push the payoff curve out by 12-24 months. That means the stock can rerate on transaction close and regulatory clarity over the next 1-3 months, but the durability of the move depends on whether Oncor can actually convert load into sanctioned transmission spend without a cost-of-capital squeeze.

Contrarianly, the current setup may still underprice California’s regulatory asymmetry: constructive transmission returns help, but wildfire/affordability risk can still cap the multiple if rates rise or the CPUC turns less generous. The guidepost to watch is not adjusted EPS, but whether management can keep funding a $65B plan without leaning harder on leverage. Falsifiers are a delayed KKR close, a softer Texas approval path, or a meaningful reset higher in long rates that forces utility de-rating.

Key Decisions for Investors

• Long SRE on post-earnings weakness; favor a 1-3 month entry window while the market digests transaction timing. Target a re-rating toward higher-quality regulated-growth peers if the KKR close stays on schedule.
• Pair trade: long SRE / short XLU for 1-3 months as a relative-value expression of cleaner growth + capital recycling versus the broader regulated-utility basket. Falsify if Texas approval momentum stalls or long rates sell off hard.
• Buy KKR on any dip into the SI Partners close as a secondary beneficiary of the monetization and capital re-deployment story; keep sizing modest because the direct earnings impact is limited and deal timing is the key risk.
• Watchlist, not a trade yet: ETN and PWR as suppliers/contractors to the Texas transmission buildout. Only initiate if Oncor turns the announced projects into firm approvals and capex awards.
• Set an alert on 10Y Treasury yields and SRE relative performance: if yields back up and SRE underperforms XLU by >5% over 4-6 weeks, cut the thesis — the stock will likely be trading on duration again rather than execution.