Zacks_Analysts' Blog : Edison Int'l Beats, Keeps Guidance - Analyst Blog

Before the bell, Edison International (EIX) reported its second quarter 2011 results. In the reported quarter, the company clocked core earnings of 54 cents per share, comfortably above the Zacks Consensus Estimate of 49 cents.

However, earnings came in below the year-ago quarterly core earnings of 62 cents per share. The results reflect rate base growth at Southern California Edison (‘’SCE’’) that was more than offset by the tax benefits in the prior-year period due to a change in tax accounting.

During the reported quarter, GAAP earnings per share matched the core earnings. However, GAAP earnings were $1.05 per share in the prior-year period.

Revenue Update

Edison International's revenue was $2.98 billion, beating the Zacks Consensus Estimate by $78 million. The top line also came above the prior-year figure of $2.74 billion. In the reported quarter, Electric Utility revenues increased 8.9% year over year to approximately $2.45 billion, while Competitive power generation revenues rose 8.7% to $538 million. Operating income in the reported quarter was $380 million compared with $351 million in the prior-year period.

Segment Results

Southern California Edison: Quarterly core earnings at the segment were 65 cents per share versus 75 cents per share in the year-ago quarter. The downside reflects rate base growth offset by the tax benefits in the second quarter of 2010.

Edison Mission Group (EMG): The segment reported a core loss of 9 cents per share versus a core loss of 10 cents in the year-ago quarter. The results reflect higher trading revenue and a project distribution offset by lower realized energy prices and higher plant maintenance and outage costs.

Edison International's parent company and other: The segment reported loss per share of 2 cents compared with a core loss of 3 cents per share in the prior-year period.

Financial Details

In the reported quarter generated cash and cash equivalents were $945 million versus $868 million at the end of prior-year period. Long-term debt increased to $13.0 billion compared with approximately $11.1 billion at the end of second quarter of 2010.

Guidance

The company expects core earnings in the range of $2.60 to $2.90 per share for 2011. Including non-core items of $0.01, GAAP earnings are expected to be in the range of $2.59 to $2.89 in 2011.

Our Take

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. Further growth in the company is supported by the consistent performance of its stable utility operations, California's supportive regulatory environment, ongoing alternative energy projects, and a steep and encouraging growth in the rate base.

However, several factors continue to weigh on Edison International, including a tepid economy, volatile gas prices, and the recovery of capital expansion costs. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

California-based Edison International is a utility holding company operating through its principal subsidiaries: Southern California Edison Company, Edison Mission Energy, and Edison Capital. Some of its main competitors include Sempra Energy (SRE) and The AES Corporation (AES).