8-K: Edison International Reaffirms Guidance After CPUC Decision

Edison International reaffirms its long-term and 2025 earnings guidance following the California Public Utilities Commission's final decision on Southern California Edison's 2026 cost of capital.

Summary

• The California Public Utilities Commission (CPUC) issued a final decision on December 18, 2025, authorizing Southern California Edison's (SCE) cost of capital for 2026.
• The CPUC decision extends the cost of capital mechanism in its current form through this cycle.
• SCE's authorized rate of return for 2026 is 7.59%, a slight decrease from 7.66% in 2025.
• Edison International (EIX) reaffirmed its long-term guidance, projecting a 2025-2028 Core Earnings per Share (EPS) compound annual growth rate of 5-7%, targeting 2028 Core EPS of $6.74-$7.14.
• The company also reaffirmed a 2024-2028 compound annual rate base growth of 7-8% and a 2025-2028 capital plan of $28-29 billion.
• No annual equity needs are anticipated for Edison International for the 2025-2028 period.
• The 2025 earnings guidance was reaffirmed, with EIX Core EPS expected to be in the range of $5.95-$6.20.

Sentiment

Score: 7

Explanation: The filing presents a stable outlook with reaffirmed guidance and a clear path for capital investment and shareholder returns. While the rate of return slightly decreased and debt/preferred equity costs increased, the overall message is one of consistency and confidence in the regulated business model and future growth targets, which is positive for a utility company.

Positives

• The CPUC decision extends the cost of capital mechanism in its current form, providing regulatory stability for Southern California Edison.
• Edison International reaffirmed strong long-term guidance, including a 5-7% Core EPS compound annual growth rate for 2025-2028.
• Projected 2028 Core EPS of $6.74-$7.14 indicates healthy future earnings potential.
• A significant capital plan of $28-29 billion for 2025-2028 supports continued infrastructure investment and growth.
• No annual equity needs are anticipated for 2025-2028, reducing potential shareholder dilution.
• Management projects compelling total shareholder returns of 11-13%, combining an approximate 6% dividend yield with 5-7% long-term core EPS growth.

Negatives

• The authorized rate of return for 2026 decreased slightly to 7.59% from 7.66% in 2025.
• The authorized cost of long-term debt increased from 4.58% in 2025 to 4.71% in 2026.
• The authorized cost of preferred equity increased from 6.42% in 2025 to 6.89% in 2026.

Risks

• Forward-looking statements are subject to various risks and uncertainties that may be outside the control of Edison International and Southern California Edison Company.
• Readers are directed to Edison International's and SCE's combined Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent Quarterly Reports on Form 10-Q for detailed risk factors.

Future Outlook

Edison International reaffirms its long-term guidance, projecting a 5-7% compound annual growth rate for Core EPS from 2025 to 2028, leading to a 2028 Core EPS of $6.74-$7.14. The company also expects a 7-8% compound annual rate base growth from 2024 to 2028 and plans a $28-29 billion capital expenditure for 2025-2028, with no anticipated annual equity needs during this period.

Management Comments

• "With a dividend yield of approximately 6% and our long-term core EPS growth target of 5% to 7%, Edison International offers a compelling case for total shareholder returns in the range of 11% to 13%."
• "This combination of income and growth reflects the strength of our regulated business model and our commitment to delivering sustainable value for customers and investors." Pedro J. Pizarro, president and CEO of Edison International.

Industry Context

The CPUC's decision on Southern California Edison's cost of capital is a standard regulatory process for utilities, which operate under a regulated business model. The reaffirmation of long-term guidance, including significant capital investment and rate base growth, aligns with broader industry trends of utilities investing in infrastructure modernization, grid hardening, and clean energy transition, often supported by stable regulatory frameworks. The focus on predictable earnings growth and shareholder returns is typical for mature, regulated utility companies.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct comparison.
• A 7-8% rate base growth and 5-7% Core EPS growth target for a large, regulated utility like Edison International are generally considered solid performance within the U.S. utility sector, which often targets mid-single-digit growth.
• The projected 11-13% total shareholder return, combining an approximate 6% dividend yield with EPS growth, is competitive for the utility sector, which is often favored by income-focused investors.

Stakeholder Impact

• Shareholders: Positive impact due to reaffirmed long-term growth targets, projected 11-13% total shareholder returns, and no anticipated equity dilution through 2028.
• Customers: The capital plan of $28-29 billion for 2025-2028 suggests continued investment in infrastructure, which could lead to improved service reliability and modernization.
• Employees: Stable business outlook and significant capital investment typically support job stability and potential growth opportunities.
• Creditors: The stable regulatory environment and reaffirmed financial guidance provide confidence in the company's ability to meet its financial obligations.

Next Steps

• Continue to execute on the 2025-2028 capital plan of $28-29 billion.
• Manage operations to achieve the reaffirmed 2025 earnings guidance of $5.95-$6.20 Core EPS.
• Work towards the 2025-2028 Core EPS compound annual growth rate of 5-7% and 2028 Core EPS target of $6.74-$7.14.
• Continue to grow the rate base at a 7-8% compound annual rate from 2024-2028.

Key Dates

Recommendation

The filing indicates a stable, regulated utility business with reaffirmed guidance for consistent growth in EPS and rate base, coupled with a strong dividend yield. The CPUC decision, while slightly lowering the overall rate of return, is within expectations and allows the company to maintain its financial targets without needing additional equity. This makes Edison International a reliable income and growth stock, suitable for long-term investors seeking stability. However, there are no new significant catalysts or unexpected positive developments that would warrant a "buy" or "strong buy" upgrade, nor are there severe negatives to suggest a "sell." Therefore, a "hold" recommendation is appropriate for investors already in the stock, and it remains an attractive option for those seeking stable utility exposure.

Keywords

Edison International, Southern California Edison, CPUC, Cost of Capital, EPS Guidance, Rate Base Growth, Capital Plan, Utility, Regulated Business, Shareholder Returns, EIX, SCE