Street Estimates For Sempra Energy Too Conservative, BofA Says In Upgrade

Sempra Energy’s SRE value appears more attractive, with upside to earnings guidance, BofA said in a Friday upgrade. 

The Sempra Energy AnalystJulien Dumoulin-Smith upgraded Sempra Energy from Neutral to Buy and raised the target price from $127 to $135.

The Sempra Energy Thesis: Sempra Energy is among the handful of energy utilities and infrastructure companies to reaffirm its topline guidance for 2020 and provide visibility into 2021, with potential upside at the California utilities, Dumoulin-Smith said in the upgrade note.

The company may raise its earnings guidance during its second-quarter earnings call, and the current Street expectations appear too conservative, the analyst said. 

Sempra Energy is poised for historical earned returns on equity levels at the California jurisdictions, while the Texas load has been resilient, he said. 

Although new COVID-19 cases in Texas Wednesday hit a record high and the oil market has been declining, the Electric Reliability Council of Texas has shown a meaningful improvement in load after the easing of lockdown restrictions in the state, Dumoulin-Smith said.

These trends further affirm underlying positive load trends, the analyst said. 

The analyst expects upward revisions in earnings estimates to be “a clear catalyst for value oriented names” like Sempra Energy.

SRE Price Action: Shares of Sempra Energy were up 0.81% at $124.48 at the time of publication .

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Posted In: BofA SecuritiesJulien Dumoulin-SmithUtilitiesAnalyst ColorUpgradesPrice TargetAnalyst Ratings