) reported adjusted earnings of 32 cents per share for the second
quarter of 2012, missing both the Zacks Consensus Estimate of 33
cents and the year-ago quarterly earnings of 56 cents per share.
The steep decline in earnings was primarily due to losses at the
Midwest Generation unit and a delay in the 2012 rate case decision
regarding regulatory support for investment made by the utility's
subsidiary Southern California Edison.
On a reported basis, including one-time items, earnings came in at
22 cents per share for the reported quarter versus 54 cents per
share in the year-ago quarter. The variance of 10 cents in the
reported quarter between adjusted and reported earnings was due to
the exclusion of the results of Homer City, in anticipation of the
orderly transfer of the Homer City plant to its owner-lessors,
General Electric Company
). For Edison International, this will result in a loss of material
control and all beneficial economic interest in the Homer City
Edison International's revenue rose $74 million year over year to
$3.06 million in the reported quarter, in line with the Zacks
Southern California Edison (SCE) segment's second quarter 2012
earnings were 59 cents per share compared with 65 cents in the
year-ago quarter. In the reported quarter, earnings decreased
primarily due to a delay in the 2012 California Public Utilities
Commission (CPUC) general rate case decision as higher depreciation
and net interest expenses are not accounted in currently authorized
revenue. The revenue requirement ultimately adopted by the CPUC
will be retroactive to January 1, 2012. SCE also incurred
incremental steam generator inspection and repair costs related to
outages at the San Onofre Nuclear Generating Station that were
offset by other operation and maintenance cost reductions.
Edison Mission Group (EMG) segment's quarterly GAAP loss was 34
cents per share compared with a loss of 9 cents per share in the
year-ago quarter. Adjusted losses were 25 cents per share compared
with a loss of 7 cents per share in the same quarter, last year.
Losses resulted from lower average realized energy, capacity prices
and higher fuel prices. This loss was partially offset by lower
planned maintenance costs at Midwest Generation; lower
distributions from the Doga project; decreased energy trading
revenues; lower renewable energy income; and higher interest
expense from new project financings. One-time items for both
quarters included the results for its Homer City plant, in
anticipation of the transfer of Homer City to the owner-lessors.
Edison International's parent company and other segment digested a
quarterly loss of 2 cents per share in both the reported and the
Edison International, in the first half of 2012, generated $1.16
billion from operating activities compared with $1.22 billion
generated in the year-ago period. Cash and cash equivalents at the
end of the reported period were $1.18 billion versus $1.47 billion
at the end of the year-ago period. Long-term debt remained flat at
$13.66 billion compared with $13.67 million at year-end 2011.
Edison International would provide 2012 earnings guidance after SCE
has received a final decision on its 2012 CPUC General Rate Case.
With its 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.
In addition, an incremental dividend adds to the company with the
Federal Reserve planning to keep benchmark interest rates low
through mid-2013. In December 2011, the company raised its annual
dividend from $1.28 per share to $1.30 per share. Going forward
with the management targeting to dish out 45% - 55% of Southern
California Edison's earnings as dividend we see ample scope for
dividend appreciation going forward.
Southern California Edison operates in a supportive regulatory
environment of California. The California regulator has approved an
ROE of 11.5% since 2008, decoupled earnings from demand volatility
and also partial recovery of fuel and power purchase cost. 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 (SPVP).
Going forward, Californian fundamentals would allow the utility to
grow to stronger levels with the improvement in the economic
With a forward-looking regulatory backup allowing the utility to
file its General Rate Cases for three years, Southern California
Edison has witnessed a sharp rise in its regulated rate base in
recent times. Over the past five years, the regulators allowed rate
base of the utility to grow by a CAGR of approximately 11%. Going
by the trend we expect positive development regarding recovery of
investment by the regulated utility in its 2012 General Rate Case
(GRC) and the cost of capital proceeding. Overall, the company
plans capital expenditure in the range of $11.8 billion to $13.2
billion for 2012 2014 to boost annualized growth in its rate base
by 7% - 9%. Thus, over the longer run, we maintain our long-term
Outperform rating on the stock.
Currently, it holds a short-term Zacks #3 Rank (Hold), primarily
due to the high-level of current valuation of Edison International.
Year-to-date, the stock rose almost 12% and is now hovering near
its 52-week high.
Based in Rosemead, California, Edison International engages in the
supply of electric energy in central, coastal and southern
EDISON INTL (EIX): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
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