On Thursday, Jefferies, a global investment banking firm, began coverage on shares of Edison International (NYSE:EIX) with a Buy rating and established a price target of $93.00. The firm's analysis indicates a total shareholder return (TSR) of over 18%, bolstered by an expected earnings per share (EPS) compound annual growth rate (CAGR) of approximately 7%. This growth projection includes an estimated 40-60% recovery from legacy wildfire costs, which is anticipated to significantly strengthen the company's financial outlook.
Edison International is now seen as poised to grow at a rate surpassing the average for its sector, potentially outperforming its long-term financial projections. This positive shift comes as a response to concerns regarding the company's exposure to fluctuating interest rates. The firm's analyst cited California's regulatory environment as increasingly supportive, contributing to the optimistic stance on Edison International as well as other utilities within the state.
The analyst's statement underscores the belief that Edison International's strategic positioning and the favorable regulatory landscape in California have set the stage for the company's accelerated growth. This growth is expected to address and alleviate investor concerns related to the impact of interest rate exposure on the company's financial health.
The price target of $93.00 reflects the firm's confidence in Edison International's ability to leverage the recovery of costs associated with past wildfires and to capitalize on the supportive measures provided by the state of California. The Buy rating suggests that the firm views the stock as an attractive investment opportunity with potential for significant returns.
The initiation of coverage and the setting of a price target are based on current market conditions and the firm's analysis of Edison International's financial prospects. As the company moves forward, investors will likely monitor its performance in relation to the expectations set forth by Jefferies.
In other recent news, Edison International reported a core earnings per share (EPS) of $1.51 for the third quarter of 2024, with a year-to-date EPS of $3.88. The company has revised its 2024 core EPS guidance to a range of $4.80 to $5.00. Despite these positive figures, Ladenburg Thalmann has downgraded Edison International's stock rating from Neutral to Sell due to concerns over the company's ability to achieve its long-term EPS growth target of 5%-7%.
Recent developments include a recovery of approximately $4.5 billion since 2021 and plans for a $1.6 billion securitization after the TKM settlement agreement. Edison International also anticipates electric rates to align with local inflation from 2024 to 2028 and a decrease in the total energy bill for customers by 2045.
Furthermore, the firm expressed doubts about Edison International's financial goals, noting increased contributions from operational variances to the company's earnings expectations for 2025. This is in stark contrast to recent Administrative Law Judge recommendations emphasizing customer affordability.
Looking ahead, Edison International is planning for upcoming ERP and AMI filings within the next 6 to 12 months and sees growth in smaller data centers in California, particularly in AI-related applications. The timeline for the Woolsey case suggests a potential settlement discussion in about 18 months.
InvestingPro Insights
Edison International's financial metrics and market performance align with Jefferies' optimistic outlook. According to InvestingPro data, the company's revenue grew by 10.61% in the most recent quarter, indicating strong operational performance. This growth supports the analyst's projection of a 7% EPS CAGR.
InvestingPro Tips highlight Edison International's commitment to shareholder returns, having raised its dividend for 18 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 3.84%, reinforces the potential for the 18% total shareholder return projected by Jefferies.
The company's profitability over the last twelve months and analysts' predictions of continued profitability this year align with the positive regulatory environment in California mentioned in the article. However, investors should note that Edison International operates with a significant debt burden, which could impact its financial flexibility.
For those seeking a deeper analysis, InvestingPro offers 6 additional tips that could provide further insights into Edison International's investment potential.
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