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Edison (EIX) Gains From Capital Investments, Solvency Position a Woe

·3 min read

Edison International EIX is benefiting from systematic capital investment to strengthen its infrastructure, which will boost customer reliability. However, weak solvency position remains a threat.

This Zacks Rank #3 (Hold) stock delivered an earnings surprise of 1.69%, on average, in the last four quarters. The Zacks Consensus Estimate for 2021 earnings per share is pegged at $4.52, up 0.9% over the past 60 days.

Tailwinds

The company generates revenues from favorable rate-base outcomes from regulatory authorities. In January 2021, the California Public Service Commission approved recovery of certain incremental wildfire mitigation expenses through track 2 of Edison’s general rate case with the revenue requirement of $391 million. It has also received approval of the regulatory authority for spending $800 million to support electric vehicles.

Edison is actively exploring opportunities to expand utility operations through systematic capital investment. The company plans to invest $12.6 billion over the long term to expand its distribution and transmission facilities.

The company’s Charge Ready 2 program will act as a catalyst toward achieving its carbon neutral target by 2045, through electrification of vehicles. It is also committed to a long-term goal to electrify its own vehicle fleet, including 100% of all light-duty vehicles by 2030.

Headwinds

Edison’s wildfire expenses continue to adversely impact its operational results. Moreover, unprecedented weather conditions in California and susceptibility of additional wildfire activity remain threats.

Moreover, the company has a weak solvency position, with both its long-term as well as current debt lying significantly higher than its cash reserve, as of Mar 31, 2021.

Price Performance

In the past 12 months, shares of this utility have gained 4.1%, underperforming the industry’s 10.1% growth.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the same industry are MGE Energy Inc. MGEE, Entergy Corporation ETR and Hawaiian Electric Industries, Inc. HE, each currently having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for 2021 earnings per share for MGE Energy, Entergy Corporation and Hawaiian Electric has moved up 0.3%, 0.2%, and 8.8%, respectively, in the past 60 days.

The current dividend yield of MGE Energy, Entergy Corporation and Hawaiian Electric is 2%, 3.8% and 3.2% respectively.

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MGE Energy Inc. (MGEE) : Free Stock Analysis Report

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