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Edison International (EIX) Up 3.5% Since Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Edison International EIX. Shares have added about 3.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Edison International Tops Q4 Earnings, Offers ’17 View

Edison International reported fourth-quarter 2016 results, wherein adjusted earnings per share (EPS) of $1.01 from continuing operations surpassed the Zacks Consensus Estimate of $0.96 by 5.2%. Reported earnings were also up 14.8% from 88 cents earned a year ago.

For 2016, the company reported adjusted EPS of $3.94, which also exceeded the Zacks Consensus Estimate of $3.91 by 0.8%.

Total Revenue

Edison International's fourth-quarter revenues came in at $2,884 million, lagging the Zacks Consensus Estimate of $3,048 million by 5.4%. However, quarterly revenues improved a solid 23.2% from the year-ago tally of $2,341 million.

For 2016, the company reported revenues of $11.87 billion, which also missed the Zacks Consensus Estimate of $11.91 billion.

Operational Highlights

In the reported quarter, total operating expenses increased 15.8% to $2,318 million mainly on account of higher purchased power and fuel ( up 53.9%) expenses, as well as depreciation, decommissioning and amortization  expenses (7.9%).

On the other hand, Property and other taxes increased 3.7%, while operation and maintenance expenses dropped 6.1%.

Operating income was up 66.5% to $566 million in the reported quarter.

Interest expenses were $150 million, higher than $136 million reported in the fourth quarter of 2015.

Segment Results

Southern California Edison’s (“SCE”) fourth-quarter earnings were $1.04 per share, as against the year-ago loss of 25 cents. Earnings in the reported quarter improved primarily on account of an increase in revenues from the escalation mechanism as set forth in the 2015 General Rate Case (GRC) and lower operations and maintenance expenses, which was again partially offset by higher net financing costs and tax expenses.

Edison International Parent and Other segment incurred fourth-quarter 2016 core loss of 2 cents per share, as against the year-ago earnings of 3 cents. The core losses reflected lower revenues from Edison Capital's affordable housing investment portfolio, partially offset by lower corporate expenses.

Financial Update

As of Dec 31, 2016, cash and cash equivalents were $96 million, down from $161 million as of Dec 31, 2015. Long-term debt was $10.16 billion, lower than the 2015-end level of $10.88 billion.

Net cash from operating activities during 2016 was $3,256 million, compared with $4,509 million in 2015. Total capital expenditure amounted to $3,734 million during 2016, down from $4,225 million in 2015.

Guidance

The company provided its earnings guidance for 2017. Edison International expects core earnings in the band of $4.04 to $4.24 per share for 2017.     

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one upward revision for the current quarter.

Edison International Price and Consensus

 

Edison International Price and Consensus | Edison International Quote

VGM Scores

At this time, Edison International's stock has an average Growth Score of 'C', however its momentum is doing a bit better with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.

Outlook

Estimates have been trending upward for the stock. The magnitude of this revision looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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