Why Edison International (EIX) Is Up Today

NEW YORK (TheStreet) -- Shares of EDISON INTERNATIONAL (EIX) were up in trading Friday on the news that the public utility company has set a March 27 date for negotiations to settle costs related to its now defunct San Onofre Nuclear Generating site in California.

Edison announced that it was closing the plant and retiring its two reactors in June after leaking radioactive water forced regulators to shut the plant down. That incident left Edison with a liability of $2.1 billion in plant operation costs and $1.3 billion in potential customer refunds.

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This potential liability has been a huge risk factor for the stock. Settling the exact cost of moving on from the incident has been a big step forward for the company. If a settlement is reached Edison "would currently anticipate recording a non-core charge in the first quarter of approximately $155 million pre-tax (approximately $100 million after-tax) by further reducing the regulatory asset represented by San Onofre property, plant and equipment and related tangible operating assets."

Shares of Edison International were up 3.88% to $54.04 in trading Friday.

TheStreet Ratings team rates EDISON INTERNATIONAL as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate EDISON INTERNATIONAL (EIX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 163.3% when compared to the same quarter one year prior, rising from -$515.00 million to $326.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.20 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • EIX, with its decline in revenue, slightly underperformed the industry average of 3.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • EDISON INTERNATIONAL has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, EDISON INTERNATIONAL reported lower earnings of $2.67 versus $4.57 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $2.67).
  • In its most recent trading session, EIX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: EIX Ratings Report
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