We have maintained our Neutral recommendation on
) on Sep 18, 2013.
Why the Reiteration?
With a strong portfolio of regulated utility assets and
well-managed merchant energy operations, Edison International
presents a lower risk profile compared to its utility-only peers.
Southern California Edison ("SCE") operates in a supportive
regulatory environment of California.
The company is also implementing infrastructure improvement
programs, focusing mainly on system reliability, smart grid
technology and compliance with California's renewable energy
mandate through programs like SmartConnect and Solar Photovoltaic
Program. Going forward, management targets to dish out 45% - 55%
of SCE's earnings.
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Edison International targets a rate base growth in the range of
7% to 9% from 2013 to 2017 driven by infrastructure replacement
and reliability investments. The company expects capital
expenditure in the range of $17.8 billion to $20.3 billion for
the period 2013 to 2017. In order to strike a balance between
reliability, policy goals and affordable customer rate, the
company continues to engage in infrastructure improvement
Recently, the company acquired SoCore Energy which would expand
the company's ability to install and operate rooftop solar
installations for commercial and industry customers. Going
forward, Californian fundamentals would allow the utility to grow
to stronger levels with improvement in the economic environment.
We expect growth at Edison Mission Group to be driven by improved
performance in unregulated power generation and energy trading,
higher price realizations, upcoming wind projects and a strong
balance sheet with no near-term significant maturities. Despite
these positives, the shutdown of nuclear plants, low hedging
exposure and regulatory risks remain matters of concern.
Other Stocks to Consider
Edison International presently retains a Zacks Rank #3 (Hold).
Stocks that are worth considering in the space are
Brookfield Infrastructure Partners L.P.
Integrys Energy Group, Inc.
), all with a short-term Zacks Rank #2 (Buy).