Sempra (SRE) — 2Q26 Earnings Preview

1. Earnings Preview

Key Takeaway: Setup is modestly constructive — the bar is achievable and the Q2 print should benefit from a one-time Oncor rate-case catch-up, but the stock has de-rated ~8% since last earnings and the SIP transaction close (expected Q3) is the real catalyst the market is waiting for.

Heading into the 2Q26 print, the most important dynamic is the recognition of Oncor's base rate review benefit — management explicitly flagged on the Q1 call that the positive financial impact from the April PUCT final order (higher authorized equity layer of 43.5%, ROE of 9.75%, cost of debt of 4.94%) would be primarily recognized in Q2, along with a surcharge covering the January 1 – June 1, 2026 period, making this quarter a structurally stronger earnings quarter than Q1. Consensus adjusted EPS sits at ~$1.06, well below the $1.51 reported in Q1 (which was seasonally strong), but the Oncor catch-up provides a visible tailwind that should help the company meet or modestly beat the bar. Estimate revisions have been broadly stable-to-slightly-higher since the Q1 print, with the July consensus at $1.07 vs. the $1.09 baseline set five days post-Q1 earnings, suggesting the street has not aggressively raised the bar. The stock has underperformed both XLU and the S&P 500 since May 7, declining from ~$91.57 to ~$84.66 (−7.6%) as of August 5, driven primarily by multiple compression rather than estimate cuts, leaving the setup less stretched than it was entering Q1. The key wildcard is the timing and financial terms of the Sempra Infrastructure Partners (SIP) sale — management guided Q2 or Q3 close, and any update on closing timeline, proceeds deployment, or rating agency threshold improvement could move the stock more than the EPS print itself.

2. KPIs & Consensus Expectations

Key Takeaway: Consensus adjusted EPS of ~$1.06 for 2Q26 is a manageable bar, with the Oncor rate-case catch-up providing a visible Q2 tailwind. FFO/debt trajectory is the secondary swing factor as the market watches for credit metric improvement post-SIP close.

Table 1 — Current Quarter Snapshot (2Q26)

Sources: Visible Alpha Consensus and Actuals Data (EPS — Diluted Operating, Total Capital Expenditure, Capital Expenditure – Texas Utilities/Oncor, FFO/Total Debt). 2Q26 consensus as of August 5, 2026. 2Q25 and 1Q26 actuals from Visible Alpha. FY26 guidance from SRE Q1 2026 earnings call (May 7, 2026).

Table 2 — Beat/Miss History: Adjusted EPS (Last 8 Quarters)

Pattern: In the four quarters where VA data is available, SRE beat adjusted EPS consensus three times and was in-line/slight miss once (1Q26), suggesting a modest but consistent tendency to meet or exceed the bar. Source: Visible Alpha Consensus and Actuals Data.

3. Guidance & Commentary Evolution

Key Takeaway: Guidance is unchanged since the Q1 call — FY26 and FY27 EPS ranges were both affirmed, and the long-term 7–9% growth rate was reiterated. The only post-earnings corporate action was the CFO succession announcement (July 9), which is a transition event tied to the SIP close rather than a guidance revision.

4. Guidance vs. Estimate Revision Tracker

Key Takeaway: Estimates have been broadly stable since the Q1 print — 2Q26 EPS consensus drifted slightly lower (from $1.09 to $1.06) while FY26 and FY27 are essentially flat, suggesting the street is tracking guidance rather than diverging. No meaningful gap between consensus and guidance midpoints.

Note: The large CapEx revision in the 5/14 vs. current column reflects a data methodology difference in how VA captures quarterly vs. annual CapEx estimates; the FY26 annual consensus of $9.4B is the more reliable figure. EPS estimates are stable and tracking guidance. Source: Visible Alpha Consensus and Actuals Data.

5. Stock Performance

Key Takeaway: SRE has underperformed both XLU and the S&P 500 since the Q1 print, declining ~7.6% vs. XLU −3.2% and SPY +5.2%, driven primarily by multiple compression (EV/EBITDA contracted ~6% over 1M and 3M) rather than estimate cuts. The de-rating reflects macro rate sensitivity and SIP transaction uncertainty, not fundamental deterioration.

Indexed Performance Since Last Earnings (May 7, 2026 = 100):

Key Events: June 15–16 — SDG&E/SoCalGas 2028 GRC filed (8-K). July 9 — CFO succession announced (Justin Bird to replace Karen Sedgwick upon SIP close). SRE peaked around July 8 at ~$95.33 before selling off ~11% into earnings. Sector ETF: XLU (Utilities Select Sector SPDR). Source: Stock Price Data (Yahoo Finance).

Performance Decomposition: Over the 1-month and 3-month windows, SRE's price decline of ~10.5% was driven primarily by EV/EBITDA multiple compression (−5.9% and −6.4% respectively), with the remainder attributable to earnings/estimate changes. The 12-month picture is more constructive: SRE is +2.1% with EV/EBITDA expanding +10.7%, suggesting the long-term re-rating thesis remains intact but near-term sentiment has turned cautious. Source: Stock Performance Decomposition Data.

6. Material News & Developments

Key Takeaway: The most important post-Q1 development is the CFO succession tied to the SIP close — a signal that the transaction is on track for Q3. The 2028 GRC filing is a long-dated but strategically significant event for California rate base growth.

• July 9, 2026 — CFO Succession Announced (8-K): Sempra's Board appointed Justin C. Bird (current CEO of Sempra Infrastructure) as incoming CFO, effective upon SIP close (expected Q3 2026). Karen Sedgwick transitions to CEO/President of SoCalGas. Implication: Confirms SIP close is on track; Bird's LNG/infrastructure background signals continued strategic focus on Texas utility growth post-SIP.
• June 15–16, 2026 — SDG&E & SoCalGas File 2028 GRC Applications (8-K): SDG&E requested $3,760M in 2028 test-year revenue requirements (with attrition adjustments of 8.7%/5.5%/5.6% for 2029–2031); SoCalGas requested $5,096M (6.2%/5.8%/5.5% attrition). CPUC proposed decision expected end-2027; new rates effective January 2028. Implication: Establishes the California rate base growth runway; CPUC final decision may differ materially from requested amounts.
• May 14–15, 2026 — SoCalGas Closes $650M Bond Offering (8-K): SoCalGas priced and closed a $650M bond offering. Implication: Routine capital markets activity; supports ongoing California utility investment program.
• May 14, 2026 — Annual Meeting Results (8-K): Shareholders elected directors, ratified auditor, and rejected an independent chairman proposal. No material governance changes.
• August 5, 2026 — California Wildfire Liability Negotiations (News): Governor Newsom is advancing a proposal to limit insurance company and attorney recoveries from the utility-funded wildfire pool, following an $18B replenishment. SCE equipment was determined to have caused the Eaton Fire. Implication: Ongoing legislative uncertainty around wildfire cost-sharing is a key overhang for SRE's California utilities (SDG&E, SoCalGas); any legislative resolution would be a meaningful de-risking event.
• August 3–5, 2026 — California Wildfire Liability Talks Ongoing (News): Utilities, insurers, and lawmakers are negotiating wildfire cost division with only four weeks left in the legislative session and no bill in print. Implication: Near-term legislative resolution appears unlikely before SRE's Q2 print; management commentary on wildfire framework progress will be closely watched.
• July 21, 2026 — Oncor to Release 2Q26 Results August 6 (Press Release): Oncor will report its own 2Q26 results on the same day as SRE. Implication: Oncor's standalone results (rate base growth, earned ROE, load growth) will be a key data point within SRE's consolidated report.
• Ongoing — SIP Transaction Regulatory Approvals: FERC and antitrust approvals received as of Q1 call. Close expected Q3 2026. Implication: Proceeds will fund parent debt paydown and utility reinvestment; rating agency threshold improvements expected ~6 months post-close.

7. Peer Commentaries / Read-Throughs (Last 60 Days — 2Q26 Current-Period Only)

Key Takeaway: Peer 2Q26 earnings are uniformly constructive on Texas/data center load growth and regulated utility earnings power, providing strong read-throughs for Oncor. California wildfire risk remains an idiosyncratic SRE overhang with no direct peer read-through. Note: All commentary below is from peers reporting on their own 2Q26 (current) period or forward outlook — no retrospective prior-quarter commentary is included.

A. Texas Load Growth & Data Center Demand

American Electric Power (AEP) — 2Q26 Earnings Release (July 30, 2026):

• AEP expanded new load additions to 69 GW through 2030, adding an incremental 6 GW of signed load agreements in 2Q26, primarily in Texas, from hyperscalers, data centers, and industrials. Read-through: Directly validates Oncor's 127 GW large-load queue and the durability of Texas demand growth heading into SRE's Q2 print.
• AEP raised FY26 operating EPS guidance to $6.25–$6.55/share (from $6.15–$6.45), citing strong H1 performance and reaffirmed 7–9% long-term growth. Read-through: Positive for SRE's own 7–9% growth rate credibility; demonstrates that regulated utilities with Texas exposure are executing on elevated capital plans.
• AEP secured a DOE loan of up to $3.3B for AEP Texas transmission projects, saving customers $685M in interest costs. Total DOE loans across AEP's portfolio now ~$5B. Read-through: Highlights the availability of low-cost federal financing for Texas transmission — a potential avenue for Oncor's accelerating CapEx program.
• Commercial retail sales in AEP's T&D utilities surged +17.4% YoY in 2Q26; industrial sales +15.0% YoY. Read-through: Broad-based demand growth in Texas and adjacent markets is a strong positive for Oncor's load growth thesis.

CenterPoint Energy (CNP) — 2Q26 Earnings Call (July 28, 2026):

• CNP submitted more than 17 GW of large load projects through ERCOT's new Batch Zero process in its Houston Electric territory, with 14 GW expected to be eligible for Batch Zero designation — representing a >65% increase from Houston Electric's current 21 GW system peak. Read-through: Confirms the unprecedented scale of Texas data center demand; Oncor's 127 GW queue is not an outlier.
• CNP increased its 10-year capital investment plan by $1.2B (to $66.7B) driven by large-load system upgrades and the Downtown Houston Revitalization project, with no additional equity financing required. Read-through: Demonstrates that Texas utilities can absorb large CapEx increases without equity dilution — consistent with SRE's equity-free financing message.
• CNP recovers approximately 85% of investments through capital trackers, with a second DCR filing requesting a $73M revenue requirement increase. Read-through: High tracker recovery rates in Texas reduce regulatory lag — a key feature of Oncor's UTM mechanism that SRE highlighted on the Q1 call.
• CNP's adjusted FFO/debt (Moody's methodology) was 13.4% at end-2Q26, up ~100 bps from Q1, with further improvement expected from a corporate alternative minimum tax refund. Read-through: Improving credit metrics at Texas peers support the thesis that SRE's FFO/debt will improve post-SIP close.

Dominion Energy (D) — 2Q26 Earnings Call (July 31, 2026):

• Dominion reported over 53 GW of data center capacity in various stages of contracting, including ~12 GW under electric service agreements, adding 5+ GW since year-end. Nine of the Dom zone's top-10 all-time peak days occurred in 2026. Read-through: Data center demand is accelerating across multiple utility territories, not just Texas — validates the structural nature of the load growth thesis.
• Dominion beat 2Q26 adjusted EPS at $0.79/share vs. $0.68 consensus (+16% beat), with Virginia segment adjusted operating earnings up 22% YoY. Revenue of $4.48B beat $4.04B consensus. Read-through: Strong beats at data-center-exposed utilities suggest the demand tailwind is translating into earnings, a positive setup for SRE's Oncor segment.
• Dominion reaffirmed all financial guidance including operating EPS, credit, dividend, and long-term growth, with FFO/debt metrics above 15% on both FY25 and Q2 LTM basis. Read-through: Peer credit discipline and guidance stability are consistent with SRE's own messaging.

B. Regulated Utility Earnings & Capital Recovery

NextEra Energy (NEE) — 2Q26 Earnings (July 24, 2026):

• NEE beat 2Q26 adjusted EPS at $1.15/share vs. $1.11 consensus (+3.6% beat), with Florida Power & Light net income of $1.41B (vs. $1.28B prior year). NextEra Energy Resources added ~3.6 GW of new renewables/storage to backlog, bringing total backlog to ~35.1 GW. Read-through: Regulated utility earnings growth and renewables backlog expansion are both tracking well at the sector's bellwether.
• NEE and Brookfield are developing a $100B data center campus in Paducah, Kentucky (announced July 29), with up to 2 GW of natural gas-fired power and 2.6 GW of battery storage. Read-through: Mega-scale data center/utility partnerships are becoming a sector theme; Oncor's large-load queue positions SRE similarly.

PG&E (PCG) — 2Q26 Earnings (July 22, 2026):

• PG&E reported 2Q26 adjusted EPS of $0.40/share vs. $0.36 consensus (+11% beat), driven by higher customer bills, AI data center demand (pipeline >12 GW), and a favorable rate case decision. Wildfire fund expense increased 15.5% to $126M, though overall operating expenses fell 3.4% YoY. Read-through: California utility earnings can beat even with elevated wildfire costs if rate case outcomes are favorable — relevant for SDG&E's TO6 FERC settlement and 2028 GRC.
• PCG advanced new data center projects with an overall pipeline of over 12 GW. Read-through: California data center demand is also growing, providing a potential incremental tailwind for SDG&E beyond the Texas story.

Edison International (EIX) — 2Q26 Earnings (July 30, 2026):

• EIX reported 2Q26 results and held a business update investor call (July 30). SCE equipment was determined to have caused the Eaton Fire (August 4 news). Read-through: Direct and critical read-through for SRE's SDG&E — the Eaton Fire determination reinforces that California wildfire liability remains a live and material risk for California utilities. Governor Newsom's proposal to limit insurance/attorney recoveries from the wildfire fund is a legislative response that could benefit utilities but remains uncertain.

C. Power Equipment & Grid Infrastructure

GE Vernova (GEV) — 2Q26 Earnings (July 22, 2026):

• GEV reported 2Q26 organic orders of $24.2B (+88% organically) with backlog spiking; raised FY26 revenue guidance to $45.5–46.5B (from $44.5–45.5B) and cash flow guidance to $11.5–12.5B (from $6.5–7.5B). Revenue beat at $11.1B vs. $10.8B consensus. Read-through: Explosive power equipment demand confirms the infrastructure buildout supporting Texas and national grid expansion is accelerating — a structural tailwind for Oncor's transmission CapEx program.
• GEV's stock fell ~6% despite strong results, as EBITDA of $1.25B missed $1.29B consensus and wind revenue was down low-double-digits. Read-through: No direct negative read-through for SRE — SRE's exposure is to regulated T&D, not wind generation equipment.

D. Sector-Level Themes Relevant to SRE

• Large-Load Tariff Adoption: AEP now has large-load tariffs approved in 5 states (Virginia approved in 2Q26), with 3 more pending. CNP's large-load framework is expected to save Houston customers $5B over a decade. Read-through: Regulatory frameworks ensuring large customers pay their fair share are gaining traction — supportive of Oncor's ability to fund its CapEx program without burdening existing customers.
• Grid Stability Concerns: A 3+ GW power disconnect hit the PJM grid on July 22 when data centers failed to ride through a transmission fault, taking 10+ minutes to stabilize. Read-through: Grid reliability concerns from large, sudden load changes are an emerging regulatory issue; Oncor's transmission investment program is directly responsive to this risk.
• California Wildfire Legislative Uncertainty: As of August 3–5, utilities, insurers, and lawmakers are still negotiating wildfire cost-sharing with no bill in print and only 4 weeks left in the legislative session. Read-through: Key SRE-specific risk — SDG&E operates in a high-wildfire-risk zone and any legislative outcome (positive or negative) could materially affect SRE's California earnings trajectory.
• Equity Financing Discipline: Both CNP (no equity for $1.2B CapEx increase) and Dominion (completed 2026 equity program) demonstrated capital discipline. Read-through: Consistent with SRE's message of eliminating common equity issuances through 2027 post-SIP close.

8. Insider Transaction Activity

Key Takeaway: Three open-market sales since the Q1 print, all relatively small in dollar terms. One was a pre-planned 10b5-1 sale (Chief Legal Counsel); the other two appear discretionary. No open-market buys. The absence of insider buying is not alarming given the stock's recent weakness, but the lack of any purchase signal is notable.

Source: SEC Form 4 Filings (Insider Transaction Data). Only open-market buys (code P) and sales (code S) included. No open-market purchases were filed in the period May 7 – August 5, 2026.

9. Key Risks & Questions for Management

Key Risks

• SIP Transaction Timing & Terms: Any delay beyond Q3 2026 or adverse change in proceeds/structure would push out balance sheet improvement and rating agency threshold upgrades, which are the primary near-term re-rating catalyst.
• California Wildfire Liability: Legislative session ends with ~4 weeks remaining and no bill in print. SCE's Eaton Fire determination (August 4) heightens scrutiny on California utilities. A failure to pass meaningful wildfire liability reform would leave SDG&E exposed to uncapped liability risk, a persistent multiple discount.
• Oncor Incremental CapEx Firming: Management committed to a Q2 call update on the ~$9B of incremental capital opportunities beyond the base plan. If the update is less specific or smaller than expected, it could disappoint a market that has priced in continued CapEx acceleration.
• Oncor UTM Regulatory Timeline: The inaugural UTM filing (covering $4.4B of T&D assets placed in service since January 2025) has a potential hearing on August 20 and interim rates possible around October 4. Any delay in the final order or rate implementation would push out the earned-ROE improvement.
• SDG&E TO6 FERC Settlement: Approval expected H2 2026 with retroactive effect to June 1, 2025. Any FERC pushback or modification would reduce the retroactive benefit and delay the ROE improvement for SDG&E.
• Rating Agency Threshold Improvement: Moody's requires further progress on construction projects (ECA LNG Phase 1, Port Arthur) in addition to SIP close. Any construction setback could delay the credit upgrade cycle.
• Interest Rate Sensitivity: SRE's NTM P/E of 16.1x and EV/EBITDA of 15.7x are sensitive to rate movements. The stock's recent underperformance vs. SPY (+5.2%) while XLU also lagged suggests macro rate headwinds are a sector-level drag.

Questions for Management

1. SIP Transaction Update: Can you confirm the SIP close is on track for Q3 2026? What is the expected net proceeds to Sempra, and how will they be allocated between parent debt paydown and utility reinvestment? When do you expect rating agency threshold improvements to be formalized?
2. Oncor Incremental CapEx: You committed to a Q2 call update on the ~$9B of incremental capital opportunities. How much of that $9B has now been firmed up, and what is the expected timing of incorporation into the base plan? Is there additional “I-squared” upside beyond the $9B?
3. Oncor UTM & Rate Case Catch-Up: How much of the Oncor rate case benefit (surcharge for January 1 – June 1, 2026) was recognized in Q2? What is the expected quarterly run-rate benefit from the new authorized ROE and equity layer going forward?
4. California Wildfire Legislation: What is your current assessment of the probability and timeline for wildfire liability reform in California? How are you engaging with the Governor's office and legislators? What is the financial exposure for SDG&E if no reform passes this session?
5. SDG&E TO6 FERC Settlement: What is the expected financial impact of the TO6 settlement if approved (retroactive to June 1, 2025)? Is there any risk of FERC modifying the settlement terms?
6. ECA LNG Phase 1: Has first LNG been produced? What is the current status of substantial completion, and when do you expect to begin recognizing LNG revenues from long-term contracted sales?
7. FY26 Guidance Confidence: With H1 complete, can you narrow or raise the $4.80–$5.30 FY26 adjusted EPS guidance range? What are the key variables that could push you toward the high or low end?