8-K: Edison International Reports Mixed Fourth-Quarter and Full-Year 2023 Results, Issues 2024 Guidance

Edison International reported a decrease in fourth-quarter GAAP earnings per share but exceeded its wildfire mitigation target, while also introducing 2024 EPS guidance and reiterating long-term growth targets.

Summary

• Edison International reported fourth-quarter 2023 GAAP earnings per share of $0.99, down from $1.09 in the same quarter of the previous year.
• However, core earnings per share for the fourth quarter were $1.28, up from $1.15 in the prior year.
• Full-year 2023 GAAP EPS was $3.12, compared to $1.61 in 2022, while core EPS was $4.76, up from $4.63 in the previous year.
• Southern California Edison (SCE) exceeded its Wildfire Mitigation Plan (WMP) target by deploying more than 5,580 miles of covered conductor.
• Edison International introduced 2024 EPS guidance of $4.75-$5.05 and reiterated long-term core EPS growth targets of 5%-7% for both 2021-2025 and 2025-2028.
• The company's board declared a quarterly common stock dividend of $0.78 per share, payable on April 30, 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the company exceeding its core EPS guidance and making progress in wildfire mitigation. However, the decrease in GAAP earnings and the challenges related to wildfire costs and regulatory proceedings temper the overall sentiment.

Positives

• Edison International exceeded its core EPS guidance for 2023.
• SCE has made significant progress in wildfire mitigation, exceeding its covered conductor installation target.
• The company has achieved a substantial reduction in wildfire risk.
• Edison International has a strong track record of meeting annual EPS guidance.
• The company increased its annual dividend for the 20th consecutive year.
• The company is actively pursuing cost recovery for wildfire-related events.
• The company is investing in operational excellence and reliability-focused activities.

Negatives

• Fourth-quarter 2023 GAAP earnings per share decreased compared to the same quarter in the previous year.
• The company's 2024 EPS guidance implies modest growth for the year.
• Interest expense on wildfire settlement-related debt is increasing.
• SCE Operational Variance is expected to be lower year-over-year.
• Parent & Other costs are higher due to the absence of a gain on preferred stock repurchase.

Risks

• The ability of SCE to recover costs through regulated rates is subject to regulatory approval.
• Wildfire-related costs and liabilities pose a significant risk to the company.
• Regulatory and legislative restrictions could limit SCE's ability to implement wildfire mitigation measures.
• Extreme weather events and natural disasters could cause operational issues and unanticipated costs.
• The company faces risks related to the decommissioning of San Onofre.
• Cost allocation could result in higher rates for utility customers.
• Actions by credit rating agencies could downgrade Edison International or SCE's credit ratings.

Future Outlook

Edison International is confident in achieving its long-term EPS growth targets of 5-7% for 2021-2025 and 2025-2028. The company expects increased electricity demand due to electrification and is focused on grid investments and operational excellence. The company also anticipates potential value creation from cost recovery proceedings and new investment opportunities.

Management Comments

• Pedro J. Pizarro, president and CEO of Edison International, stated that delivering core EPS above the midpoint of the guidance range demonstrates the company's ability to manage variability in the business.
• Pizarro also highlighted the progress of SCE's covered conductor program and its impact on reducing the need for Public Safety Power Shutoffs.
• Maria Rigatti, Executive Vice President and Chief Financial Officer, reaffirmed the company's confidence in achieving its long-term EPS growth target of 5 to 7% from 2021 to 2025.
• Rigatti emphasized that the company has a robust and high-quality capital investment plan for 2023 through 2028.

Industry Context

This announcement reflects the ongoing challenges and opportunities in the utility sector, particularly in California, where wildfire mitigation and the transition to clean energy are key priorities. The company's focus on grid hardening and electrification aligns with broader industry trends, while the financial results are impacted by wildfire-related costs and regulatory proceedings.

Comparison to Industry Standards

• Edison International's covered conductor program is considered industry-leading, with over 5,580 circuit miles installed in five years, which is a significant achievement compared to other utilities.
• The company's 85-88% risk reduction in catastrophic wildfire losses is a notable improvement, although specific comparisons to other utilities' risk reduction metrics are not provided in the document.
• The company's long-term EPS growth targets of 5-7% are in line with the growth expectations of other large regulated utilities, but the impact of wildfire-related costs and regulatory proceedings makes direct comparisons challenging.
• The company's capital expenditure plan of $38-43 billion from 2023-2028 is substantial, reflecting the significant investments required for grid modernization and wildfire mitigation in California. This is comparable to other large utilities in the state, such as PG&E, which are also undertaking significant capital programs.
• The company's dividend yield of over 4% is competitive with other utilities, but the payout ratio of 45-55% of SCE core earnings is a standard practice in the industry.

Legal Proceedings

• SCE filed a cost recovery application for the TKM events, requesting $2.4 billion.
• The company is targeting a 90%+ resolution of Woolsey claims and plans to file a cost recovery application in Q3 2024.

Stakeholder Impact

• Shareholders will benefit from the company's dividend increase and long-term growth targets.
• Customers will benefit from improved grid reliability and reduced wildfire risk.
• Employees will be impacted by the company's focus on safety and operational excellence.
• The company's financial performance and regulatory proceedings will impact creditors and suppliers.

Next Steps

• SCE will continue to install covered conductor, targeting 1,050 miles in 2024.
• The company will file the Woolsey cost recovery application in Q3 2024.
• SCE will continue its GRC advocacy for funding critical investments.
• The company will continue to evaluate building electrification pilots.
• Edison International will continue to invest in digital and AI capabilities.

Key Dates

Keywords

Edison International, Southern California Edison, Wildfire Mitigation, Core EPS, Earnings Guidance, Covered Conductor, Dividend, Rate Base, Capital Expenditures, Regulatory, Financial Results