Sempra's Third Quarter Tests Whether Texas Growth Can Outrun LNG Delays And Permitting Noise

Sempra heads into its third-quarter report with a story that is structurally strong but tactically unsettled. Texas load growth keeps getting bigger on paper, yet the last quarter added new friction: a damaged compressor at the ECA LNG export project, political pushback over 765kV transmission lines, and a later timeline for clarity on the giant Batch Zero interconnection process. The November 5 release, due before the open, is less about whether Sempra can post a decent quarter and more about whether those near-term snags are being contained.

The numbers themselves set a modest bar. Analysts expect earnings of $1.18 per share on revenue of about $3.35 billion, both roughly 6.3% above the year-ago quarter's $1.11 and $3.15 billion. That is steady utility growth, not acceleration, and it sits near the low end of the 7% to 9% long-term growth rate management keeps reaffirming. The whisper number of $1.22 runs a few cents above consensus, suggesting some investors expect Texas to keep doing the heavy lifting. For the full year, the Street's $5.12 estimate sits slightly above the midpoint of management's $4.80 to $5.30 range, and the $5.52 forecast for 2027 also leans toward the upper half of the $5.10 to $5.70 outlook. Analysts are not stretching, but they are giving Sempra credit for execution.

One comparison deserves care. Second-quarter earnings of $1.16 included roughly $50 million of favorable catch-up from the April base rate settlement at the Texas utility, a benefit that should not repeat. A third-quarter figure at or above consensus without that help would be cleaner evidence that the new rate structure and rising rate base are lifting the run rate. Summer weather in a market where ERCOT just set a 91 gigawatt peak also matters for volumes and the tone of the call.

The bigger questions are operational. Management had said the 45% SI Partners stake sale to KKR, which deconsolidates about $9 billion of debt, and the ECOGAS sale were both on track to close during the quarter. Confirmation that both closed would support the balance sheet and the promise that asset sales displace new common equity, while any slippage would sharpen focus on Moody's negative outlook. ECA LNG is the other swing factor. Substantial completion of Phase 1 has already slid from spring first cargo to summer to the fourth quarter, so a firm update showing the compressor repairs on schedule would help, while another delay would challenge management's credibility on project timing.

In Texas, investors should look for how the August Public Utility Commission discussion on ERCOT's Batch Zero exception and the governor's call for an audit of the 765kV process have affected planning. Management quantified 44 gigawatts of eligible large load, with about 8 gigawatts already connected and ramping, and promised a capital roll-forward on the fourth-quarter call. Signs that the $4 billion Dallas-Fort Worth transmission upgrades are firming, and that permitting noise has not pushed spending out of the $47.5 billion base plan, would keep the upside narrative intact.

Sentiment has warmed noticeably, moving from slightly bearish before the last report to moderately bullish now. The stock has barely moved since then, edging up 0.4% while the S&P 500 slipped slightly, and at about $85 it trades below its 200-day average near $89.54. It has rebounded well off its post-earnings low of $76.21 but remains roughly 3.5% under the $88.14 high and far from the prior quarter's $96 peak. The central issue is simple: Sempra needs to show that the Texas earnings engine is compounding cleanly on its own while the LNG and permitting problems shrink rather than spread.

This earnings preview was originally published on Earnings Whispers.

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