Before the bell, Edison International (EIX) reported its fourth quarter and fiscal 2010 results. In the reported quarter, the company clocked core earnings of 58 cents per share missing the both the Zacks Consensus Estimate and year-ago quarterly earnings of 61 cents and 59 cents, respectively. Earnings fell largely due to higher income tax expense and lower trading revenues.

On a reported basis, including one-time items, earnings came in at 51 cents for the reported quarter versus 65 cents in the year-ago quarter. The variance of 7 cents in the reported quarter between core and reported earnings were due to write-off of capitalized costs at its Powerton plant in Illinois.

Fiscal 2010 core earnings came in at $3.48 per share, falling short of the Zacks Consensus Estimate of $3.51. However, fiscal 2010 earnings per share rose 7% from fiscal 2009 core earnings of $3.25. On a reported basis, the company’s reported fiscal 2010 earnings were $3.82 per share compared to $2.58 in fiscal 2009.

Revenue Update

Edison International’s revenue climbed 0.4% year over year to $12.4 billion in fiscal 2010. However, revenues fell short of the Zacks Consensus Estimate of $13.8 billion. In fiscal 2010, Electric Utility revenues decreased $18 million to approximately $10 billion, while Competitive power generation revenues increased $30 million to $2.4 billion.

Segment Results for Fourth Quarter 2010

Southern California Edison (SCE) segment’s fourth quarter 2010 GAAP cum core earnings were 56 cents per share compared to 53 cents and 51 cents, respectively, in the fourth quarter of 2009. In the reported quarter, earnings rose primarily driven by rate base growth.

Edison Mission Group (EMG) segment’s fourth quarter 2010 GAAP earnings were 3 cents per share compared to 17 cents in the fourth quarter of 2009. Core earnings were 10 cents per share compared to 13 cents in the year-ago quarter. Core earnings declined year over year mainly due to higher income tax expense and lower trading revenues.

Edison International’s parent company and other segment reported loss per share of 8 cents compared with a loss of 5 cents in the year-ago quarter. This was mainly due to higher income tax expense.

Financial Condition

In fiscal 2010, Edison International generated $3.5 billion from operating activities compared to $3.0 billion in fiscal 2009. Cash and cash equivalents at the end of the reported period were $1.4 billion versus $1.7 billion at fiscal-end 2009. Long-term debt increased to $12.4 billion from slightly above $10.4 billion at fiscal-end 2009.

Outlook

Based in Rosemead, California, Edison International engages in the supply of electric energy in central, coastal and southern California.

Edison International’s consistent performance through its solid base of stable utility operations, recent SCE rate hike, ongoing alternative energy projects, balance sheet strength, and a relatively cheap earnings-based valuation, partially offset by slowly recovering economy, volatile gas prices, and recovery of capital expansion costs.

The company expects fiscal 2011 to witness strong earnings growth at SCE’s regulated utility assets. This, however, would be tempered by EMG’s merchant energy operations, which face weak power market fundamentals. The company expects fiscal 2011 core earnings per share in the range of $2.60–$2.90.

Edison International currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock. The near-term cautious stance is shared by its peers like American Electric Power Company Inc. (AEP) and Dominion Resources Inc. (D).

 
AMER ELEC PWR (AEP): Free Stock Analysis Report
 
DOMINION RES VA (D): Free Stock Analysis Report
 
EDISON INTL (EIX): Free Stock Analysis Report
 
Zacks Investment Research