Breaking Down Sempra (SRE) Financial Health: Key Insights for Investors

You're looking at Sempra (SRE) right now, trying to square their massive, utility-focused infrastructure spend with their near-term earnings outlook, and honestly, that tension is the whole story. The company is committed to a $13 billion capital plan for 2025 alone, with over $10 billion funneled directly into their growing U.S. utilities in Texas and California, which is a defintely necessary investment to modernize the grid and meet rising demand. But still, management has affirmed their full-year 2025 adjusted earnings per share (EPS) guidance in the tight range of $4.30 to $4.70, which forces a question about how they're funding that growth without diluting shareholders immediately. The answer lies in their strategic asset recycling, specifically the announced sale of a 45% stake in Sempra Infrastructure Partners, which is expected to bring in $10 billion in transaction proceeds to efficiently fund the capital plan and sharpen the focus on their core regulated business.

Revenue Analysis

You need to know where Sempra (SRE)'s money is actually coming from, and the quick takeaway is this: the company is a regulated utility giant that's successfully pivoting back to its stable, rate-base-driven core while monetizing its high-growth, but more volatile, infrastructure assets. For the twelve months ending September 30, 2025, Sempra (SRE) generated total revenue of approximately $13.71 billion, reflecting a solid year-over-year growth rate of 6.14%.

This growth is a critical recovery. To be fair, the company's annual revenue for 2024 was $13.19 billion, which was a significant 21.14% decline from the prior year. That volatility was a headwind, but the 2025 trend shows the core business stabilizing and the infrastructure segment delivering.

Primary Revenue Sources and Segment Contribution

Sempra (SRE)'s revenue is fundamentally split across three major, distinct platforms. The majority of the primary revenue comes from the regulated utility segments, which deliver stable, predictable cash flows thanks to rate-based returns approved by regulators like the California Public Utilities Commission (CPUC).

• Sempra California: Provides electric and natural gas services through San Diego Gas & Electric (SDG&E) and SoCalGas. This is the bedrock of the business, driven by authorized base revenues.
• Sempra Texas Utilities: Primarily Oncor Electric Delivery Company LLC, a major transmission and distribution utility. Revenue here is growing due to significant customer growth and new infrastructure investment, especially with the state's massive energy demand from data centers and AI.
• Sempra Infrastructure: Focuses on liquefied natural gas (LNG) and other energy infrastructure, like the Port Arthur LNG project. This segment provides a high-growth, international revenue stream, but it's also where you see more earnings volatility.

Near-Term Revenue Performance (Q3 2025)

Looking at the most recent quarter, the revenue performance shows a clear upward trajectory, which is defintely a good sign for investors. Here's the quick math on the quarterly jump:

The Q3 2025 revenue of $3.15 billion beat consensus estimates, driven by higher natural gas revenues and improved regulatory margins, particularly in the Sempra California segment. Sempra California is a major earnings driver, with segment earnings growing 18% year-to-date in 2025, supported by higher authorized base revenues following the retroactive 2024 General Rate Case Final Decision. That's a clear signal of regulatory support translating to financial stability.

Strategic Shift and Revenue Opportunities

The most significant change in the revenue profile is the strategic pivot toward a more utility-focused business model. This means Sempra (SRE) is actively recycling capital from its infrastructure arm back into the regulated utility segments. The planned sale of an equity interest in Sempra Infrastructure Partners and the sale of Ecogas México are key actions here. This move concentrates future revenue growth on the regulated, capital-intensive U.S. utilities, where an estimated $10 billion of the company's roughly $13 billion 2025 capital plan is allocated.

The opportunity here is twofold: you get the consistent, regulated returns from California and Texas, plus the long-term, high-volume growth from LNG. For a deeper dive into who is betting on this strategic shift, you might want to check out Exploring Sempra (SRE) Investor Profile: Who's Buying and Why?

Profitability Metrics

You need to know if Sempra (SRE) is actually making more money or just moving numbers around, and the latest 2025 margins tell a clear story: the company is generally more profitable than its industry peers, but its net margin is under pressure.

For the twelve months ending in June 2025, Sempra posted a gross profit of $11.655B, which represents a 4.02% increase year-over-year. This growth at the top line is solid, but the real insight is in how efficiently that revenue turns into profit at each stage of the income statement.

A Deep Dive into Sempra's Profitability

When you look at the core profitability ratios, Sempra (SRE) stands out in the utilities sector, which is typically constrained by regulation (rate-making) on how much profit it can earn on its capital base. What this estimate hides is the impact of Sempra's liquid natural gas (LNG) and infrastructure business, which can sometimes boost margins beyond a pure-play regulated utility.

Here's the quick math on Sempra's latest profitability, using the most recent Trailing Twelve Months (TTM) and current 2025 data, compared to the broader industry:

The gross profit margin of 41.3% is right in line with the sector average of 42.3%, suggesting Sempra's cost of goods sold-primarily fuel and purchased power-is well-managed, but not dramatically better than peers. The real operational efficiency shows up lower down.

Operational Efficiency and Margin Trends

The operating profit margin (earnings before interest and taxes) of 23.68% is a good sign for cost management, as it's slightly higher than the sector proxy of 22.68%. This tells you that Sempra is defintely doing a solid job controlling its selling, general, and administrative (SG&A) expenses and depreciation relative to its core revenue. That's a strong indicator of management's discipline.

Still, when you look at the net profit margin, a crucial trend is emerging. Sempra's current net margin is 20%, which is a significant premium over the S&P 500 Utilities sector average of 17.2% as of Q3 2025. However, this 20% is a drop from the 22.1% reported in the previous year.

• Net Margin: Dropped from 22.1% to 20% year-over-year.
• Industry Net Margin: Increased to 17.2% in Q3 2025.
• Sempra's net margin is contracting while the sector's is expanding.

This margin contraction for Sempra, even as the sector's net margin is rising (up to 17.2% from 14.8% year-over-year for the S&P 500 Utilities sector), is a yellow flag. It suggests that higher interest costs, taxes, or non-operating expenses are eating into the operating profit, potentially due to the company's capital-intensive growth projects like LNG infrastructure. For a deeper analysis of the risks and opportunities driving these numbers, you should check out the full post on Breaking Down Sempra (SRE) Financial Health: Key Insights for Investors.

Next step for your team: Finance should model the impact of a 100 basis point (one percent) increase in the cost of debt on the net margin by the end of the fiscal year.

Debt vs. Equity Structure

You're looking at Sempra (SRE)'s balance sheet and seeing a lot of debt, which is typical for a capital-intensive utility, but the real story is how they're strategically managing that debt. The direct takeaway is that Sempra is executing a major capital recycling plan that is expected to fund its substantial growth without needing to issue new equity through 2029, a significant de-risking move.

As of the third quarter of 2025, Sempra's total debt stood at approximately $32.693 billion. This is a massive number, but it's the cost of building and maintaining critical energy infrastructure. The breakdown shows that the vast majority of this is long-term, which is what you want to see in a regulated utility business.

• Short-Term Debt: Approximately $3.708 billion.
• Long-Term Debt: Approximately $28.985 billion.

Here's the quick math on financial leverage: Sempra's Debt-to-Equity (D/E) ratio as of September 2025 was 1.05. This means for every dollar of shareholder equity, the company has $1.05 in debt. For the utility sector, where stable cash flows support higher leverage, this ratio is defintely manageable and is actually cited as being below the industry average. A peer like Spire Inc., for instance, operates with a higher D/E ratio of around 1.41.

Balancing Debt, Equity, and De-Risking

The company's recent financing activity shows a clear strategy to fund its substantial capital expenditure (CapEx) program-which includes an estimated $13 billion in energy infrastructure investments for 2025 alone-without diluting shareholders. The key action was the September 2025 agreement to sell a majority stake in Sempra Infrastructure Partners (SIP) to a KKR-led consortium for $10 billion. That's smart capital allocation.

This $10 billion cash infusion is critical because it is expected to eliminate the need for new equity raises in the entire 2025-2029 capital plan. The move also streamlines the business, with 95% of future earnings expected to come from Sempra's regulated U.S. utilities in Texas and California, reducing the risk profile associated with its infrastructure and LNG projects.

Still, the credit rating agencies are watching closely. S&P Global Ratings affirmed Sempra's 'BBB+' issuer credit rating in September 2025, but the outlook remains Negative. This reflects the minimal financial cushion and the execution risks tied to the construction of two large liquefied natural gas (LNG) projects. The market is rewarding the strategic shift, but the company must execute on its CapEx plan and maintain its consolidated Funds From Operations (FFO) to Debt metric above the agency's threshold to avoid a downgrade. You can find more on the shareholder base driving this confidence here: Exploring Sempra (SRE) Investor Profile: Who's Buying and Why?

Next Step: Monitor Sempra's Q4 2025 earnings call for updated guidance on the SIP sale closing timeline and its direct impact on the FFO to Debt ratio.

Liquidity and Solvency

When you look at Sempra (SRE)'s balance sheet, you need to remember you're analyzing a capital-intensive utility, not a tech company. Their liquidity ratios-the current ratio and quick ratio-are defintely lower than what you'd see in other sectors, but that's typical for the industry. The current ratio, which measures current assets against current liabilities, stood at approximately 1.59 for the third quarter of 2025.

The quick ratio, which strips out inventory to look at the most liquid assets, was around 0.48 for the same period. For a utility, these ratios are less critical for day-to-day operations because their revenue streams are regulated and highly predictable. Still, a quick ratio under 1.0 means they can't cover all short-term debt with their most liquid assets. That's a structural reality of the business model, but it requires a careful look at cash flow.

The working capital trend shows the pressure from Sempra (SRE)'s massive infrastructure build-out. For the first six months of 2025, the net change in working capital components was a cash use of ($498) million. This negative change reflects the continuous investment required for their regulated assets. Here's the quick math on cash flow, which is where the real story lives:

The cash flow statement confirms the capital-intensive nature of the business. Net Cash from Operating Activities (CFO) was a solid $2,266 million in the first half of 2025, but it was easily overwhelmed by the Investing Activities (CFI), driven by capital expenditures of ($4,640) million. The full-year 2025 capital plan is set at approximately $13 billion, with nearly $9 billion already deployed in the first three quarters. This results in a significant negative Free Cash Flow (FCF) of -$1.45 billion for the third quarter of 2025.

So, the liquidity concern isn't about immediate survival; it's about funding this massive $56 billion 2025-2029 capital plan. The financing cash flow is crucial here. Sempra (SRE) is actively managing this, most notably through the strategic sale of a 45% equity interest in Sempra Infrastructure Partners, which is expected to bring in roughly $10 billion. This capital recycling is the clear action to enhance credit metrics and fund future growth without solely relying on debt, a key point for investors assessing Breaking Down Sempra (SRE) Financial Health: Key Insights for Investors.

What this estimate hides is the reliance on the capital markets and favorable regulatory environments to support this investment cycle. Your key takeaway for liquidity and solvency should be focused on the funding strategy:

• Monitor the $10 billion asset sale closure.
• Watch the pace of CapEx vs. regulatory rate base recovery.
• Expect continued negative Free Cash Flow in the near term.

Valuation Analysis

You're looking at Sempra (SRE) to see if the recent stock run-up has left it overvalued. The quick answer is mixed: while a discounted cash flow (DCF) model suggests the stock is slightly undervalued, its key valuation multiples are running at a premium to the utility sector average. This means the market is pricing in a lot of growth from the Sempra Infrastructure segment, especially its Liquefied Natural Gas (LNG) projects.

As of November 2025, Sempra's stock price is trading around the $91.00 to $92.00 range, which is near its 52-week high of $95.77. The stock has climbed about 14% over the last three months, signaling strong investor optimism, but it's essentially flat over the last 12 months, down about 0.77%. That volatility shows the market is still debating the company's growth-versus-utility status.

Is Sempra Overvalued or Undervalued? The Multiples Tell Two Stories

When we look at traditional utility valuation metrics, Sempra (SRE) appears expensive. The Price-to-Earnings (P/E) ratio, which compares the stock price to its earnings per share (EPS), stands at approximately 27.94 (Trailing Twelve Months or TTM). Here's the quick math: that's significantly higher than the peer average of roughly 19.8x.

Also, the Enterprise Value-to-EBITDA (EV/EBITDA) ratio is sitting at about 17.30. This metric, which accounts for debt (crucial for capital-intensive utilities), is notably higher than the industry median of 10.44, suggesting investors are willing to pay a premium for Sempra's future EBITDA growth. The Price-to-Book (P/B) ratio is also elevated at around 1.90.

What this estimate hides is the value of the infrastructure business. The high multiples are a bet on the long-term, regulated cash flows from Sempra California and Sempra Texas Utilities, plus the high-growth, non-regulated earnings from its LNG export facilities. You defintely need to understand the strategic direction outlined in the Mission Statement, Vision, & Core Values of Sempra (SRE). to justify this premium.

Dividend Stability and Analyst Outlook

For income-focused investors, Sempra remains a reliable utility. The company is currently paying an annual dividend of $2.58 per share. This translates to a current dividend yield of approximately 2.8%. The payout ratio-the percentage of earnings paid out as dividends-is in the 75% to 79% range. This is high, but typical for regulated utilities that return most earnings to shareholders, still leaving room for capital reinvestment.

Wall Street analysts are generally positive on the stock. The consensus rating is a 'Moderate Buy' or 'Buy'. The average price target is clustered between $95.42 and $99.75. This suggests an implied upside of roughly 4% to 9% from the current price, aligning with the view that the stock is slightly undervalued based on future earnings projections, not just today's trailing metrics.

Near-term risks still exist, particularly regulatory changes in California or execution delays on major LNG projects, but the long-term growth story is why analysts remain bullish.

• Buy: 8-10 analysts
• Hold: 6 analysts
• Sell: 0 analysts

Risk Factors

You're looking at Sempra (SRE) because of its regulated utility backbone, but even this business model carries significant, near-term risks you need to map to your investment thesis. The core challenge is a classic utility tightrope walk: financing massive growth while navigating a complex regulatory and interest rate environment.

The most immediate financial risk is the sheer scale of the company's capital plan coupled with a high debt load. Sempra is committed to investing approximately $13 billion in energy infrastructure in 2025 alone, with over $10 billion earmarked for its U.S. utilities. This aggressive spending to modernize the grid is necessary, but it's a big cash drain. For example, the company's long-term debt stood at $34.936 billion as of June 30, 2025, and total debt was $38.59 billion. Rising interest rates make financing that debt more expensive, which directly impacts profitability and cash flow. High CapEx means negative free cash flow, so managing liquidity is defintely paramount.

External and Regulatory Headwinds

The external risks are concentrated in Sempra's two key operating regions: California and its non-regulated infrastructure segment. California's regulatory environment, governed by the California Public Utilities Commission (CPUC), is a constant source of uncertainty. In January 2025, S&P revised Sempra's outlook to negative from stable and downgraded SoCalGas's credit rating to A- from A, citing regulatory uncertainty as a factor. Plus, the ongoing risk of wildfires in California, while mitigated, still requires enormous capital outlay, and recovery of those costs through rates is never guaranteed.

• California Regulatory Risk: Potential for a lower return on equity (ROE) in 2025.
• Infrastructure Volatility: The Sempra Infrastructure segment posted a loss of $580 million in Q3 2025, highlighting the risk of exposure to unregulated markets.
• Legal/Political: Lingering risk from a securities fraud investigation and general uncertainty in the political environment for California natural gas distribution companies.

Mitigation and Strategic Actions

Sempra is actively working to simplify its business and de-risk its profile. The strategy is to pivot hard toward a pure-play, regulated U.S. utility model, aiming for approximately 95% of future earnings to come from these stable operations. This is a smart move for long-term predictability.

Their primary mitigation efforts are structured around five value creation initiatives for 2025:

The sale of the Sempra Infrastructure stake is the big one; it's a $10 billion injection that shores up the balance sheet and funds the CapEx. This move is designed to reduce the need for external financing and improve credit metrics. You can get a deeper dive into who is betting on this strategy by Exploring Sempra (SRE) Investor Profile: Who's Buying and Why?

The bottom line is that Sempra is a high-CapEx, high-debt utility in a tough regulatory spot, but management has a clear, funded plan to pivot to a lower-risk profile. Monitor the execution of the $10 billion asset sale and the CPUC's final decisions on ROE and cost recovery.

Growth Opportunities

You're looking at Sempra (SRE) and seeing a utility with a complex structure, but the company is defintely executing a clear, two-pronged strategy to simplify its business and drive long-term earnings growth. The direct takeaway is that Sempra is transitioning to a more focused, regulated U.S. utility, fueled by capital from its high-value Liquefied Natural Gas (LNG) franchise, targeting a robust long-term earnings per share (EPS) Compound Annual Growth Rate (CAGR) of 7% to 9% from 2025 through 2029.

The core of Sempra's near-term growth is its $56 billion five-year capital plan (2025-2029), with an estimated $13 billion earmarked for investment in 2025 alone to modernize energy infrastructure. This massive capital deployment is concentrated in its two high-growth regulated markets: Sempra California (SDG&E and SoCalGas) and Sempra Texas Utilities (Oncor). The Texas market, in particular, is a key driver, seeing rapid demand growth from new data centers and AI infrastructure projects, which requires significant expansion of the high-voltage transmission grid.

• 2025 Adjusted EPS Guidance: Sempra reaffirmed its full-year adjusted EPS guidance range of $4.30 to $4.70.
• Annual Revenue: The company's annual revenue for the last twelve months (as of Q3 2025) was approximately $13.71 billion.
• Regulated Rate Base Growth: The regulated utility rate base has grown by an average of nearly 11% annually through 2024.

The strategic initiatives Sempra is pursuing in 2025 are designed to fund this utility growth efficiently. The company is actively engaged in capital recycling, which means selling non-core or minority stakes in high-value, non-utility assets to reinvest the proceeds into lower-risk, regulated utility projects. The most significant example is the agreement to sell a 45% equity interest in Sempra Infrastructure Partners to KKR affiliates, a deal expected to generate approximately $10 billion in proceeds. Here's the quick math: this move eliminates the need for Sempra to issue common equity to fund its 2025-2029 capital plan, strengthening the balance sheet and improving the overall business mix to a goal of approximately 95% earnings from regulated U.S. utilities.

The LNG franchise, while being partially sold, remains a vital growth engine and competitive advantage. The final investment decision (FID) on Port Arthur LNG Phase 2 is a massive undertaking, with estimated project capital expenditures of $12 billion plus another $2 billion for common facilities. This phase will add approximately 13 million tonnes per annum (Mtpa) of U.S.-produced LNG capacity, backed by a 20-year Sale and Purchase Agreement (SPA) with a strong partner like ConocoPhillips for 4 Mtpa of offtake. This international export capacity diversifies Sempra's revenue streams and provides financial flexibility that many purely domestic utilities just don't have. Want to dive deeper into who's backing this growth? Check out Exploring Sempra (SRE) Investor Profile: Who's Buying and Why?

Sempra's competitive edge rests on its strategic positioning in North America's largest economies-California and Texas-and its ability to self-fund its massive infrastructure build-out through its LNG asset sales. The focus on expanding high-voltage transmission aligns with the broader industry trend of meeting surging electricity demand from data centers, which is a powerful, long-term tailwind. The table below summarizes the key financial growth drivers for the 2025 fiscal year:

The next step for you is to monitor the Q4 2025 earnings call in early 2026. Management has indicated they will provide an update to the full five-year capital plan then, which will be crucial for validating the projected growth trajectory.