Edison International Earnings: Several Ways for Growth To Accelerate

We are reaffirming our $74 fair value estimate for Edison International EIX after management reported $1.09 per share of core earnings during the first quarter of 2023, up from $1.07 last year. We are reaffirming our narrow moat and stable moat trend ratings.

Edison’s stock continues to rally off its mid-October lows and now trades in line with our fair value estimate. We still think Edison offers a favorable total return option for investors given its 4% dividend yield and our 7% annual earnings growth estimate. However, we think additional valuation upside for the stock is limited.

Management reaffirmed their 5%-7% annual earnings growth outlook through 2025. We think Edison will hit the high end of that based on its current $6 billion annual capital investment plan and constructive regulation. Our 2025 EPS estimate is at the high end of management’s $5.50-$5.90 guidance range.

Edison management said they plan to file their 2025-28 rate request this month and will roll forward their growth target through 2028. We think management might increase their growth target range to 6%-8% given the amount of electric system infrastructure that must be built to support California’s carbon-reduction goals for vehicles and buildings by 2045. We expect regulators will take at least 18 months to review Edison’s request and make a ruling.

Higher interest costs remained a drag on earnings during the first quarter, as we expected. Earnings are on track to meet our full-year forecast, in line with management’s $4.55-$4.85 EPS guidance.

Edison is still working to close out its 2017-18 disaster liabilities that now total almost $9 billion with about $1 billion unresolved. Management reiterated their intent to file with regulators a request during the third quarter to recover about $2 billion of the $6 billion of liabilities that Edison has had to self-finance. A successful outcome would help reduce interest costs and boost earnings growth.