SRE

Sempra is a regulated-utility holding company whose durable earnings engine is rate base: per the 10-K, weighted-average rate base reached $18.0B at SDG&E (+7% YoY) and $14.0B at SoCalGas (+12%), while Oncor's regulatory rate base jumped to ~$31.5B from $26.6B (+18%). Management expects rate base — and therefore authorized earnings — to keep rising in 2026 and beyond. That is the bull case, and it's real: this is a growing, regulated, dividend-paying franchise (board declared $0.6575/quarter; dividends paid $1.60B, +6.9%).

The problem is that 2025 reported results badly understate that franchise, which makes the stock look both worse and more expensive than it is. Net income fell 35.8% to $1.84B and diluted EPS dropped 37.8% to $2.75, but the MD&A shows the damage was concentrated and partly non-recurring: Sempra California earnings fell $418M, driven by a $432M regulatory disallowance charge tied to the 2024 GRC Track 2 final decision, and Sempra Infrastructure swung from +$911M to a $160M loss. On 2024's $2.86B of net income the P/E would be ~20x rather than the headline 33x — so the multiple is inflated by depressed, partly one-time-impaired earnings, but you are still paying a full price for a utility, and ROE of 5.8% is weak.