Report
Travis Miller
EUR 850.00 For Business Accounts Only

Morningstar | Edison's Growth Still on Track Ahead of GRC Decision

We are reaffirming our $67 fair value estimate and narrow moat and stable moat trend ratings for Edison International after the company reported core earnings per share of $1.56 in the third quarter of 2018, up from $1.44 in the third quarter of 2017.

Year-to-date earnings of $3.21 per share are still down from last year as Edison awaits California regulators' final decision in the general rate case. New rates will be retroactive to January 2018, so a decision in the fourth quarter should allow Edison to show core growth for the year. We continue to forecast 6% annual earnings growth and similar dividend growth through 2022.

Management reaffirmed its $13.7 billion capital investment plan in 2018-20, in line with our forecast. We don't expect substantial changes to that plan when regulators issue their final general rate case decision. This results in near 10% annual rate base growth during the next three years.

Senate Bill 901 has eased some market fears about utilities' wildfire risks. In the near term, higher insurance costs and litigation will probably be a slight drag on earnings growth. We still await a final report on the 2017 Thomas fire, which is likely to have some financial impact on Edison. We don't expect it to be large enough to have a material impact on our fair value estimate, however.

In the long run, we expect regulators will allow Edison to pass fire-related prevention and insurance costs to ratepayers, reducing the impact on shareholders. We also think fire protection and system safety investments could be another avenue for earnings growth. Edison has proposed $582 million of fire-prevention investments to comply with SB 901. We expect there are many more subsequent fire-related investments that Edison will be able to make in the coming years.
Underlying
Edison International

Edison International is a holding company. Through its subsidiary, Southern California Edison Company (SCE), which is an investor-owned public utility, the company is primarily engaged in the business of supplying and delivering electricity to southern California. The company is also the parent company of Edison Energy Group, Inc., a holding company for Edison Energy, LLC, which is engaged in the business of providing energy services to commercial and industrial customers. SCE supplies electricity to its customers through transmission and distribution networks. Its transmission facilities include sub-transmission facilities and are located primarily in California but also in Nevada and Arizona.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Travis Miller

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