SRE - Sempra upgraded Edison downgraded as BofA shuffles California utilities

Sempra Energy ( NYSE: SRE ) and Edison International ( NYSE: EIX ) are moving in different directions in Thursday's trading, +0.5% and -1.9% respectively, as Bank of America upgraded Sempra to Buy with a $161 price target and downgraded Edison to Underperform with a $69 PT ahead of earnings releases for the California-based utilities.

BofA's Julien Dumoulin-Smith notes Sempra ( SRE ) shares have pulled back 10% from early May highs despite incremental progress on LNG contracting, with the likelihood rising for a positive final investment decision on the Port Arthur LNG project.

While Sempra ( SRE ) may be requesting liquefaction fees that are higher than some peer developers, the analyst thinks "the global energy crisis is supportive of potential counterparties willing to pay a premium for higher confidence in gas supply deliverability."

But BofA believes Edison ( EIX ) faces "underappreciated" risk from financing exposure, estimating a below-4% adjusted EPS compound annual growth rate due to mounting finance costs associated with legacy wildfire claims.

Edison ( EIX ) has consistently determined that recovery of CPUC jurisdictional fires before 2019 is not probable; as a result, BofA shares shareholders "bear the responsibility for financing costs that have [increased] significantly."

BofA also rates PG&E ( PCG ) as a Buy after wildfire risks have been "overly priced in to shares currently trading at deeply discounted levels."

ConocoPhillips announced today it entered into a heads of agreement with Sempra to buy a 30% direct equity holding in the Port Arthur LNG project .

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