Zacks_Analysts' Blog : Earnings Preview: Edison Intl. - Analyst Blog

EdisonInternational (EIX), a generator and distributor of electric power and an investor in infrastructure and energy assets, is scheduled to report third-quarter 2011 financial results on Wednesday, November 2, 2011. The current Zacks Consensus Estimate for the quarter is $1.27 a share. For the quarter under review, revenue is projected at $4.4 billion, according to the Zacks Consensus Estimate.

Second-Quarter 2011, a Synopsis

Edison International’s earnings of 54 cents a share had beaten the Zacks Consensus Estimate of 49 cents. However, earnings came in below the year-ago quarterly 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. On a reported basis, including one-time items, earnings came in at 54 cents a share, compared with $1.05 earned in the year-ago quarter.

Edison International’s revenue was $2.98 billion, beating the Zacks Consensus Estimate by $78 million. The top line was also ahead of 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.

Fiscal 2011 Guidance

Management expects 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.

Third-Quarter 2011 Consensus

Analysts considered by Zacks expect Edison International to post third-quarter 2011 earnings of $1.27 a share, reflecting a decline of 13% from the year-ago quarter. The current Zacks Consensus Estimates for the quarter range from a low of $1.20 to a high of $1.35.

Zacks Agreement & Magnitude

Of the 9 analysts following the stock, 1analyst each has revised upward and downward the estimate in the last 7 days. The downward revision cast a material impact on the Zacks Consensus Estimate, which fell to $1.27 from $1.32.

Mixed Earnings Surprise History

With respect to earnings surprises, Edison International has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 4.92% to positive 23.73%. The average remained at 8.23%. This suggests that Edison International has beaten the Zacks Consensus Estimate by an average of 8.23% in the trailing four quarters.

Conclusion

Based in Rosemead, California, Edison International engages in the supply of electric energy in central, coastal and southern California. The company operates through its two principal subsidiaries: Southern California Edison Company (“SCE”), and Edison Mission Group (“EMG”).

Southern California Edison is a public utility providing electricity primarily to central, coastal, and southern California (excluding Los Angeles). It also has a presence in Nevada and Arizona.

Edison Mission Group is a holding company with subsidiaries engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from independent power production facilities. It also engages in hedging and energy trading activities in competitive power markets

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. Our modestly bullish outlook for the company is supported by the consistent performance of its stable utility operations, California's supportive regulatory environment, ongoing alternative energy projects, steep growth in rate base and a relatively cheap earnings-based valuation. However, several factors continue to weigh on Edison International, including a tepid economy, volatile gas prices, imminent expiry of its cheap rail transport contract and the recovery of capital expansion costs.

The company expects fiscal 2011 to witness strong earnings growth at SCE’s regulated utility assets wind business, and lower income taxes. This however would be tempered by EMG’s merchant energy operations which faces weak power market fundamentals.

Edison International currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock. The near-term cautious stance is shared by its peers like American Electric Power Company Inc. (AEP) and Ameren Corporation (AEE).