) reported adjusted earnings of 81 cents per share for the third
quarter of 2012, missing both the Zacks Consensus Estimate of
$1.10 and the year-ago quarterly earnings of $1.26 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 58 cents per share for the reported quarter versus $1.30 per
share in the year-ago quarter. The variance of 23 cents in the
reported quarter between adjusted and reported earnings was
mainly due to the exclusion of the results of Homer City, after
the orderly transfer of the Homer City plant to its
General Electric Company
). For Edison International, this resulted in a loss of material
control and all beneficial economic interest in the Homer City
Edison International's revenue rose $248 million year over year
to $4.07 billion in the reported quarter, beating the Zacks
Consensus Estimate of $3.70 billion.
Southern California Edison (SCE) segment's third quarter 2012
earnings were $1.11 per share compared with $1.25 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 & repair costs related
to outages and severance costs 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 42
cents per share compared with earnings of 10 cents per share in
the year-ago quarter. Adjusted losses were 28 cents per share
compared with earnings of 5 cents per share in the same quarter,
last year. Losses resulted from lower average realized energy,
capacity prices, reduced generation, and higher fuel prices. This
loss was partially offset by lower planned maintenance costs cum
depreciation at Midwest Generation; decreased earnings from
natural gas-fired projects, and lower income tax benefits.
One-time items for both quarters included the results for its
Homer City plant, which were classified as discontinued
operations effective from the third quarter of 2012. Homer City
losses from discontinued operations during the third quarter of
2012 were 24 cents per share, including an impairment charge of
21 cents per share, compared with earnings of 5 cents per share
in the prior-year period. One-time items also included a gain of
9 cents per share on the sale of an Edison Capital lease interest
in a power plant.
Edison International's parent company and other segment digested
a quarterly loss of 11 cents per share in the reported quarter
versus a loss of 4 cents in the year-ago quarter. Losses
increased primarily due to higher consolidated state income taxes
of 9 cents per share.
Edison International, in the first nine months of 2012, generated
$2.16 billion from operating activities compared with $2.82
billion generated in the year-ago period. Cash and cash
equivalents at the end of the reported period were $1.08 billion
versus $1.39 billion at the end of the year-ago period. Long-term
debt remained flat at $13.71 billion compared with $13.69 million
at year-end 2011.
Edison International would not provide 2012 earnings guidance
owing to SCE not receiving a final decision on its 2012 CPUC
General Rate Case. Going forward the company plans to provide its
2013 earnings guidance simultaneously when it reports its fourth
quarter and full year 2012 results on February 26, 2013.
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's appeal
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 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 through 2014 to boost
annualized growth in its rate base by 7% - 9%.
Currently, it holds a short-term Zacks #3 Rank (Hold), primarily
due to the high-level of current valuation of Edison
International. Over the longer run, we maintain our Neutral
recommendation on the stock. Year-to-date, the stock rose almost
12.8% and is now trading 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
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