Edison International (EIX) reported solid fourth-quarter 2014 results wherein its adjusted earnings of $1.06 per share came ahead of the Zacks Consensus Estimate of 84 cents by an impressive 26.2%. The quarterly number also rose 30.9% from the year-ago figure of 79 cents per share.
The upbeat performance primarily reflects impressive results from its prime affiliate, Southern California Edison ("SCE"). Several cost-saving initiatives undertaken by the company also helped to deliver the striking results.
Taking into account earnings of 13 cents per share from discontinued operations and the positive impact of 8 cents of the San Onofre Nuclear Generating Station (“SONGS”) Settlement, the GAAP earnings for the quarter were $1.27 per share compared with the year-ago number of 92 cents per share.
2014 adjusted earnings per share of $4.53 also surpassed the estimates by 4.9%. The annual adjusted figure was also higher than the year-ago figure of $3.77 per share by 20.2%. Including a charge of 22 cents related to the SONGS Settlement Agreement and income of 58 cents from discontinued operations, GAAP earnings came in at $4.89 per share in 2014, up 75.9% from earnings of $2.78 per share in 2013.
Total Revenue
Edison International's fourth-quarter revenues were $3,114 million, beating the Zacks Consensus Estimate of $2,691 million by 15.7%. The quarterly figure also surpassed the year-ago figure of $2,943 million by 5.8%. Revenues climbed higher on account of improved results at the SCE segment.
2014 revenues of $13,413 million also increased 6.6% year over year.
Operational Highlights
In the reported quarter, total operating expenses decreased 0.7% to $2,421 million on account of lower purchased power and fuel expenses, partially offset by higher operations and maintenance expenses. Total input cost including fuel and power purchase was $1,029 million in the fourth quarter, down 4.1% from $1,073 million in the year-ago period. Total operations and maintenance expenses increased 1% year over year to $901 million.
Operating income was up 37.2% year over year to $693 million in the reported quarter.
Interest expenses stood at $138 million compared with $143 million in the fourth quarter of 2013.
Segment Results
Southern California Edison’s fourth-quarter adjusted net income increased 38% to $356 million from $258 million in the year-ago quarter. The uptrend was attributable to higher authorized revenues from rate base growth, higher income tax benefits and lower severance costs.
Edison International parent company and the Other segment reported a net loss of $1 million this quarter as compared with net income of $6 million in the year-ago period. The decline was due to lower income tax benefits and higher corporate expenses, partially offset by higher revenues from Edison Capital’s investments in housing projects.
Financial Update
As of Dec 31, 2014, cash and cash equivalents were $132 million, down from $146 million as of Dec 31, 2013. Long-term debt was $10,234 million, higher than the 2013-end level of $9,825 million.
Net cash from operating activities during 2014 was $3,248 million versus $2,967 million in 2013. Total capital expenditure amounted to $3,906 million, up 8.5% from $3,599 million in the year-ago period.
Guidance
The company has not provided any guidance for 2015 and is awaiting a decision on the SCE 2015 General Rate Case from the California Public Utilities Commission.
Nevertheless, management stated that it expects rate base growth of 7% to 9%, compounded annually. The company also lowered its capital expenditure forecast for 2015 by $100 million and increased the same for 2016 by $200 million. Also, management expects to return to its target payout ratio of 45% to 55% in the coming years.
Peer Comparison
CMS Energy Corp. (CMS) reported fourth-quarter 2014 earnings per share of 35 cents on an adjusted basis. Quarterly earnings lagged the Zacks Consensus Estimate by a penny.
PG&E Corp.'s (PCG) adjusted operating earnings per share of 53 cents in the fourth quarter of 2014 and missed the Zacks Consensus Estimate of 54 cents by a penny.
American Electric Power Company Inc. (AEP) reported fourth-quarter 2014 operating earnings of 48 cents per share, missing the Zacks Consensus Estimate of 52 cents by 7.7%.
Our Take
Edison International delivered strong quarter results. It is focused on its transmission and distribution infrastructural development programs. The company continues to focus on reducing its operating expenses. The company is also focused on expanding its operations to not only support the environmental objectives of California but also to achieve its own long term growth plan.
Additionally, the company is focused on maximizing shareholder value. In Dec 2014, the company raised its quarterly cash dividend by 17.6% to 41.75 cents from the previous payout of 35.5 cents.
Focus on enhancing efficiency and capacity expansion will serve the company well in the coming years.
Edison International presently holds a Zacks Rank #3 (Hold).
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