Last week, you might have seen that Sempra (NYSE:SRE) released its quarterly result to the market. The early response was not positive, with shares down 3.6% to US$160 in the past week. It was a mildly positive result, with revenues exceeding expectations at US$3.5b, while statutory earnings per share (EPS) of US$1.77 were in line with analyst forecasts. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Sempra after the latest results.
Following the recent earnings report, the consensus from 15 analysts covering Sempra is for revenues of US$13.5b in 2022, implying a measurable 5.3% decline in sales compared to the last 12 months. Per-share earnings are expected to leap 132% to US$8.33. Before this earnings report, the analysts had been forecasting revenues of US$13.5b and earnings per share (EPS) of US$8.03 in 2022. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$171, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Sempra analyst has a price target of US$192 per share, while the most pessimistic values it at US$144. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 10% by the end of 2022. This indicates a significant reduction from annual growth of 5.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.3% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sempra is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Sempra's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Sempra's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$171, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Sempra analysts - going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Sempra (at least 2 which can't be ignored) , and understanding them should be part of your investment process.
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