Sempra (SRE): AI-Driven Call Option Opportunity

Sempra is a holding company focused on energy infrastructure investments in North America. Its core business involves investing in, developing, and operating energy infrastructure, and providing electric and gas services. 'Sempra California' includes 'SDG&E' and 'SoCalGas', regulated public utilities providing electric and natural gas services in Southern California. 'Sempra Texas Utilities' holds interests in 'Oncor' and 'Sharyland Utilities', regulated electricity transmission and distribution utilities in Texas. 'Sempra Infrastructure' focuses on LNG, energy networks, and low carbon solutions in the U.S. and Mexico. The company's business strategy centers on transmission and distribution investments aimed at generating stable cash flows and earnings, delivering safe, reliable, and cleaner energy affordably, and enhancing shareholder value. Sempra differentiates itself by focusing on regulated utilities and strategic infrastructure assets, with a growing emphasis on LNG and low-carbon solutions.

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SRE's technical outlook is moderately bullish, showing a sustained upward trend over the past 90 days, closing recently at $92.515. The price is trading above its 21-day EMA of $91.41 and 50-day SMA of $87.54, signifying short- to medium-term bullish momentum; the 200-day SMA is $78.99. The MACD at 1.29, while positive, is showing a decreasing histogram, suggesting the upward momentum might be slowing. The RSI at 59.79 indicates increasing buying pressure but is not yet in overbought territory. The stochastic oscillator shows %K at 58.59 and %D at 57.80, indicating a possible continuation of the current trend. Bollingers show a BBP of 0.62, suggesting the price is trading near the middle of the range. ADX is at 33.30, indicating the presence of a trend, but not an exceptionally strong one. Recent price action shows a slight pullback from highs, but overall the trend remains positive, suggesting potential for further upside in the next 1-3 months, although some consolidation is possible given the slowing MACD histogram.

Sempra's MD&A reveals a mixed financial performance. For the three months ended June 30, 2025, Sempra's earnings attributable to common shares decreased to '$461 million' from '$713 million' in 2024. For the six months ended June 30, 2025, earnings decreased to '$1,367 million' from '$1,514 million' in the prior year. Natural gas revenues decreased slightly by '$24 million' (2%) for the three-month period. Electric revenues also decreased by '$113 million' (10%) for the same period. However, revenues from energy-related businesses increased significantly by '$126 million' (34%) for the three months ended June 30, 2025. Sempra California's earnings decreased by '$57 million' (18%) for the three months ended June 30, 2025, but increased by '$85 million' (9%) for the six months ended June 30, 2025. Sempra Infrastructure's earnings decreased by '$219 million' for the three-month period and '$204 million' (48%) for the six-month period, primarily due to unfavorable foreign currency and inflation effects in Mexico. Sempra has established an ATM program providing for the offer and sale of shares of Sempra common stock having an aggregate gross sales price of up to '$3.0 billion'. The company expects capital expenditures for PP&E and investments in 2025 to total '$12.1 billion'.

Sempra's Q2 2025 earnings call projects a moderately bullish sentiment. The company reported adjusted EPS of $0.89, 'in line with the prior period's results,' and affirmed its full year 2025 adjusted EPS guidance range of $4.30 to $4.70, as well as its 2026 EPS guidance of $4.80 to $5.30. A key driver is Oncor's growth in Texas, supported by the recently passed HB5247, which is expected to increase Oncor's earned ROE by 50 to 100 basis points over time. Oncor also filed a request for a comprehensive base rate review, seeking a higher ROE and equity layer. Sempra Infrastructure is progressing with major construction projects, including ECA LNG Phase 1, which is over 94% complete, and Port Arthur LNG Phase 1, which is over 50% complete, with Phase 2 receiving necessary permits and executing a 20-year SPA with JERA. While the equity sale at Sempra Infrastructure is ongoing, with a nonbinding letter of intent with KKR contemplating a sale within or above the 15% to 30% range, management emphasizes the importance of optimizing the implied equity value and improving the balance sheet. Karen Sedgwick noted that 'this is certainly an exciting time for Sempra,' highlighting potential catalysts such as continued improvement in earned ROE at Oncor and earnings contributions from ECA LNG Phase 1 and Cimarron Wind.

SRE's financial performance presents a mixed picture. Revenue has fluctuated, starting at $3,640M in Q1 2024, dipping to $2,776M in Q3 2024, and then reaching $3,000M in Q2 2025. Gross profit margin has been similarly variable, ranging from a low of 0.247 in Q2 2024 to a high of 0.526 in Q2 2025. Operating cash flow remains positive, registering at $1,487M in the most recent quarter, indicating the company is generating cash from its operations. Total debt has increased from $31,771M in Q1 2024 to $38,590M in Q2 2025, reflecting a rise in leverage. While net income has been generally positive, the inconsistency in revenue and gross profit margin, coupled with increasing debt, suggests potential challenges in maintaining consistent profitability and financial stability in the near term. The company's ability to manage its cost of revenue and operating expenses will be crucial for future performance.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.