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We have maintained our Neutral recommendation on Edison International (EIX - Analyst Report) on Sep 18, 2013.

Why the Reiteration?

With a strong portfolio of regulated utility assets and well-managed merchant energy operations, Edison International presents a lower risk profile compared to its utility-only peers. Southern California Edison (“SCE”) operates in a supportive regulatory environment of California.

The company is also implementing infrastructure improvement programs, focusing mainly on system reliability, smart grid technology and compliance with California’s renewable energy mandate through programs like SmartConnect and Solar Photovoltaic Program. Going forward, management targets to dish out 45% – 55% of SCE’s earnings.

Edison International targets a rate base growth in the range of 7% to 9% from 2013 to 2017 driven by infrastructure replacement and reliability investments. The company expects capital expenditure in the range of $17.8 billion to $20.3 billion for the period 2013 to 2017. In order to strike a balance between reliability, policy goals and affordable customer rate, the company continues to engage in infrastructure improvement activities.

Recently, the company acquired SoCore Energy which would expand the company's ability to install and operate rooftop solar installations for commercial and industry customers. Going forward, Californian fundamentals would allow the utility to grow to stronger levels with improvement in the economic environment.

We expect growth at Edison Mission Group to be driven by improved performance in unregulated power generation and energy trading, higher price realizations, upcoming wind projects and a strong balance sheet with no near-term significant maturities. Despite these positives, the shutdown of nuclear plants, low hedging exposure and regulatory risks remain matters of concern.

Other Stocks to Consider

Edison International presently retains a Zacks Rank #3 (Hold). Stocks that are worth considering in the space are Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report), Integrys Energy Group, Inc. (TEG - Analyst Report) and IdaCorp, Inc. (IDA - Snapshot Report), all with a short-term Zacks Rank #2 (Buy).

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