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EDISON INTERNATIONAL (EIX)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 GAAP EPS was $0.40 and Core EPS was $1.38; operating revenue was $4.70B and operating income was $492M, with core EPS down $0.10 YoY due to higher interest expense and prior-year CSRP true-up .
  • EIX recorded a $475M increase in estimated wildfire/mudslide losses, leading to a net charge of $448M ($323M after-tax); guidance for 2023 Core EPS was reaffirmed at $4.55–$4.85 .
  • Regulatory catalysts: CPUC cost of capital mechanism triggered, increasing SCE’s ROE to 10.75% in 2024–2025 (benefiting 2025 EPS by ~$0.39); Track 4 settlement would authorize 98% of requested revenue and 99% of rate base, adding ~$0.12 to 2024 rate base EPS over 2023 .
  • Strategic execution: SCE surpassed 5,200 miles of covered conductor and estimates an 85% reduction in catastrophic wildfire loss risk; capital plan remains $38–$43B (2023–2028) supporting ~6–8% rate base growth .

What Went Well and What Went Wrong

What Went Well

  • “We are confident in reaffirming our 2023 core EPS guidance range of $4.55 to $4.85” (CEO Pedro Pizarro), underpinned by year-to-date performance and a robust Q4 outlook .
  • Wildfire mitigation progress: >5,200 miles of covered conductor installed; modeled risk of catastrophic wildfire losses reduced by ~85% vs pre-2018 levels .
  • Regulatory momentum: ROE uplift to 10.75% in 2024–2025 via CCM (~$0.39 EPS benefit in 2025) and Track 4 settlement providing revenue/rate base clarity and ~$0.12 incremental 2024 rate base EPS over 2023 .

What Went Wrong

  • Best estimate of 2017/2018 losses increased by $475M, net charge $448M ($323M after-tax), driven by higher-than-expected settlement levels and refined claim information (majority attributable to Woolsey) .
  • Core EPS down YoY ($1.38 vs $1.48) primarily from higher interest expense and absence of the prior-year CSRP true-up; EIX Parent & Other loss widened on higher holding company interest expense .
  • Operating revenue fell YoY ($4.70B vs $5.23B), though sequential revenue improved; interest expense remained a headwind to earnings .

Financial Results

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Operating Revenue ($USD Millions)$5,228 $3,966 $3,964 $4,702
GAAP EPS ($USD)($0.33) $0.81 $0.92 $0.40
Core EPS ($USD)$1.48 $1.09 $1.01 $1.38
Operating Income ($USD Millions)($44) $620 $724 $492

Segment EPS mix (EIX consolidated, per-share):

MetricQ3 2022Q3 2023
SCE Basic EPS($0.21) $0.62
Parent & Other Basic EPS($0.12) ($0.22)
Total Basic EPS($0.33) $0.40
SCE Core EPS$1.63 $1.60
Parent & Other Core EPS($0.15) ($0.22)
Total Core EPS$1.48 $1.38

KPIs and program metrics:

KPIQ1 2023Q2 2023Q3 2023
Covered Conductor Installed (miles)Nearly 5,000 4,950+ >5,200
HFRA Distribution Miles Hardened (% by YE)~75% by 2025 plan baseline ~76% by YE 2023 target >75% by YE 2023
Wildfire Risk Reduction (vs pre-2018)75–80% 85% 85%
Capital Plan (2023–2028)Introduced$38–$43B $38–$43B (updated)
Rate Base CAGR (2023–2028)Extended~6–8% ~6–8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EIX Core EPSFY 2023$4.55–$4.85 (as of Jul 27, 2023) $4.55–$4.85 (as of Nov 1, 2023) Maintained
EIX Basic EPSFY 2023$4.18–$4.48 (as of Jul 27, 2023) $3.21–$3.51 (as of Nov 1, 2023) Lowered (reflects non-core)
CPUC ROE2024–202510.05% baseline 10.75% via CCM (effective Jan 1, 2024) Raised (+70 bps)
2025 EPS Growth Target2025–20285–7% CAGR reiterated 5–7% CAGR reiterated Maintained
Track 4 Settlement Impact2024 vs 2023N/A+$0.12 rate base EPS over 2023; authorizes 98% revenue, 99% rate base Raised (pending CPUC approval)

Earnings Call Themes & Trends

TopicQ1 2023 (May 2)Q2 2023 (Jul 27)Q3 2023 (Nov 1)Trend
Wildfire mitigation & covered conductor75–80% risk reduction; plan to reach ~7,200 miles by 2025; year-round aerial suppression Near 5,000 miles; 85% risk reduction; ~76% HFRA hardened by YE >5,200 miles; 85% risk reduction; >75% hardened by YE Continued execution and de-risking
Cost recovery (2017/2018 events)TKM filing targeted Q3; best estimate +$90M TKM filed in Aug; request ~$2.4B; modeled customer bill impact shared Best estimate +$475M; majority Woolsey; net after-tax charge $323M; Woolsey claims deadline Feb 2024 Progress with higher loss estimates and process clarity
CPUC cost of capital mechanismMonitor CCM; potential upside in 2024 Likely trigger; detailed mechanics and deadband Triggered; ROE 10.75%; ~$0.39 EPS benefit in 2025 Positive regulatory tailwind realized
Capital plan & rate base growthExtending forecasts to 2028; capex ramp $38–$43B capex; ~6–8% rate base CAGR $38–$43B capex; ~6–8% rate base CAGR; Track 4 adds clarity Stable long-term growth visibility
Technology/AI initiativesAI for inspections and ops excellence Operational excellence cost savings examples Continued efficiency pursuit; telecom lease monetization filing Ongoing efficiency and monetization

Management Commentary

  • CEO: “We are pleased with our performance year to date and…reaffirming our 2023 core EPS guidance range of $4.55 to $4.85… and delivering 5% to 7% core EPS growth through 2025 and 2028” .
  • CEO: “SCE has made tremendous progress since 2018, reducing its risk of losses from catastrophic wildfires by 85%… sharing mitigation strategies with utilities across the country” .
  • CFO: “Cost of capital mechanism triggered a 70-basis point ROE increase, resulting in 2024 and 2025 CPUC ROEs of 10.75%. This benefits 2025 EPS by approximately 39 cents” .
  • CFO: “Agreement with intervenors would authorize 98% of requested revenue requirement and 99% of requested rate base… translate to 12 cents in incremental rate base EPS over 2023” .

Q&A Highlights

  • Cost of capital mechanism: Mechanics are formulaic; ROE uplift viewed as a hedge against rate volatility; potential to reinvest portion to accelerate operational excellence .
  • Telecom infrastructure lease monetization: Filing to monetize ~850 tower/structure leases generating ~$20M annual revenue; timing aligned with regulatory approval, potential close mid-2024 to 2025 .
  • Wildfire claims trajectory: Two-thirds of the best-estimate increase attributable to Woolsey; February 2024 deadline should improve claims scope certainty .
  • EV demand outlook: California EV sales remain robust (~25% of new sales); medium/heavy-duty load growth planning with mobile solutions and targeted infrastructure .
  • PG&E rate case read-across: Limited; differing territory needs (undergrounding vs covered conductor); escalation mechanism principles watched but mechanisms differ .

Estimates Context

  • Wall Street consensus (S&P Global) EPS and revenue estimates were unavailable; a direct comparison to Q3 2023 actuals cannot be provided. Values were intended to be retrieved from S&P Global but were unavailable due to vendor limits.

Key Takeaways for Investors

  • Core performance intact: Q3 Core EPS $1.38 and 2023 Core EPS guidance reaffirmed at $4.55–$4.85, supporting a stable near-term earnings outlook .
  • Regulatory upside realized: CPUC CCM ROE uplift to 10.75% for 2024–2025 (~$0.39 EPS tailwind in 2025); pending Track 4 settlement adds ~$0.12 to 2024 rate base EPS and clarifies revenue/rate base .
  • Wildfire loss update is the swing factor: $475M increase to best estimate (net charge $448M; $323M after tax) highlights settlement cost inflation; Woolsey claims protocol deadline (Feb 2024) should improve estimate certainty .
  • De-risking narrative credible: >5,200 miles covered conductor and modeled 85% risk reduction credibly lower tail risk; continued hardening in HFRA areas supports perceived risk premium compression .
  • Long-term growth anchored by grid expansion: $38–$43B capex plan and ~6–8% rate base CAGR through 2028 underpin 5–7% EPS CAGR 2025–2028 without equity-intensive plans beyond internal programs .
  • Financing/alignment actions: Preferred tender (up to $750M) and potential telecom lease monetization can smooth equity needs and optimize capital structure amid interest-rate headwinds .
  • Near-term trading lens: Watch CPUC Track 4 approval timing, Woolsey claims developments, and evidence of interest expense mitigation; regulatory clarity and ROE uplift are positive catalysts vs GAAP volatility from non-core charges .