Edison International (EIX) had a solid start to the year consistent with its full year expectation. Its adjusted earnings of 90 cents per share for the first quarter of 2014 were ahead of the Zacks Consensus Estimate of 82 cents by 9.8%. Earnings for the quarter also increased 16.9% from the year-ago figure of 77 cents per share.
This striking performance reflects impressive results from its prime affiliate Southern California Edison (“SCE”) backed by workforce cut and income tax benefits.
Taking into account earnings of 7 cents per share from discontinued operations as well as 29 cents related to the settlement agreement for San Onofre, the generally accepted accounting principles (GAAP) measure for the quarter was 54 cents per share. The reported GAAP number, however, was down by 34.9% year over year.
Total Revenue
Edison International's first quarter revenues were $2,926 million, up 11.2% year over year. The top line exceeded the Zacks Consensus Estimate of $2,799 million by 4.5%.
Operational Highlights
In the reported quarter, operations and maintenance expenses were up 21.3% year over year to $2,595 million. Total input cost including fuel and power purchase was $1,143 million in the first quarter compared with $853 million in the year-ago period.
Interest expense stood at $141 million compared with $131 million in the first quarter of 2013, primarily due to an increase in long-term debts.
Segment Results
SCE’s first quarter adjusted earnings surged 19.2% to 93 cents per share from 78 cents earned in the year-ago quarter. The uptrend was attributable to higher authorized revenue from rate base growth, lower operation and maintenance expenses arising from reduced workforce and income tax benefits. These were partially offset by lower earnings from its investment in the San Onofre Nuclear Generating Station (“SONGS”).
Edison International parent company and the other segment reported wider loss this quarter amounting to 3 cents per share compared with a loss of 1 cent per share in the year-ago period. This is mainly due to higher costs arising from new businesses, higher corporate expenses and higher income tax benefits recognized in the first quarter of 2013.
On March, Edison Mission Energy (EME) – an Edison International affiliate – received the go-ahead from the U.S. Bankruptcy Judge Jacqueline Cox in Chicago for the proposed asset sale plan to New Jersey-based NRG Energy Inc. (NRG). Hence, the company sold its EME business for an amount of roughly $2.6 billion.
Financial Update
As of Mar 31, 2014, cash and cash equivalents were $149 million, up from $146 million as of Dec 31, 2013. Long-term debt (including current portion) was $10,426 million, at par with 2013 year-end level.
Net cash provided by operating activities during the quarter was $498 million versus $506 million in first quarter 2013.
Total capital expenditure during the quarter was $940 million compared with $979 million in the year-ago period.
Guidance
The company maintained its core earnings per share guidance in the range of $3.60–$3.80 for 2014. The Zacks Consensus Estimate for 2014 is pegged at $3.71 per share, showing a year over year decrease of 4.3%.
Peer Comparison
American Electric Power Company Inc. (AEP) reported first quarter 2014 operating earnings of $1.15 per share, beating the Zacks Consensus Estimate of 91 cents by 26.4%. The quarterly figure also improved a whopping 43.8% from the year-ago adjusted profit of 80 cents per share. The upbeat performance was supported by favorable weather and high power prices.
Entergy Corp. (ETR) posted robust first-quarter 2014 earnings. Its operational earnings came in at $2.29 per share in the quarter, beating the Zacks Consensus Estimate by 8.5%. Quarterly earnings increased a considerable 143.6% year over year on the back of higher wholesale electricity prices owing to a frigid winter and pipeline infrastructure constraints in the Northeast U.S.
CMS Energy Corp. (CMS) posted first-quarter 2014 earnings per share of 75 cents both on an adjusted and GAAP basis. The quarterly figure surpassed the Zacks Consensus Estimate of 64 cents by 17.2% and increased 41.5% on a year-over-year basis.
Our Take
Rosemead, CA-based Edison International, through its subsidiaries, engages in the supply of electric energy in central, coastal and southern California. The company’s chief unit – SCE – operates in a supportive regulatory environment, which would allow the utility to grow to stronger levels with the improvement of the economic environment. Through 2017, SCE continues to target 7–9% average annual rate base and earnings growth driven by infrastructure investment.
Edison International remains focused on its transmission and distribution infrastructural development programs. It expects to spend $15.1 billion to $17.2 billion for the period 2014 to 2017 under its capital investment plan.
Edison International presently holds a Zacks Rank #2 (Buy).
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