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Sempra Energy (SRE) is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of natural gas.
Looking ahead, from a base of stable earnings , CPUC [California Public Utilities Commission] approval of general rate cases, operational REX-West, steady progress at its LNG [liquified natural gas] terminals, the recent acquisition of EnergySouth and announcement of its first solar power project, collectively support the bullish outlook for SRE. However, higher borrowing costs, tightening credit markets, uncertainty of commodity markets, and low natural gas prices will affect the future performance of the company.
Given a discount in P/E multiples, we maintain our BUY recommendation on SRE with a six-month target price of $48.00. Price appreciation to our near-term valuation target coupled with a sustainable and secure increased quarterly dividend of $0.35 per share based on low projected earnings payouts represents annualized total return potential of 26.7%.
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