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The Zacks Analyst Blog Highlights: Edison International, Dominion Resources, Shire, Johnson & Johnson and Novartis

EIX D SHPG JNJ NVS

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For Immediate Release

Chicago, IL – December 24, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Edison International (EIX - Analyst Report), Dominion Resources Inc. (D - Snapshot Report), Shire plc (SHPG - Analyst Report), Johnson & Johnson (JNJ - Analyst Report) and Novartis (NVS - Analyst Report).

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Here are highlights from Friday’s Analyst Blog:

Edison Int’l Hikes Dividend

Edison International (EIX - Analyst Report) has increased its quarterly dividend by 3.85%, bringing the annualized dividend to $1.35 per share from the previous payout of $1.30 per share.

The quarterly dividend, after the hike, will come to 33.75 cents per share, up from the prior payment of 32.50 cents per share. The first increased dividend will be paid on January 31, 2013 to shareholders of record on December 31, 2012.  

This marks the ninth consecutive annual increase of Edison’s common stock dividend. Last year in December 2011, the company had increased the annual dividend by 1.56% to $1.30 from $1.28.

The company targets a dividend payout ratio of 45% to 55% of the earnings of Southern California Edison. This increase of 3.85% would prove to be the first step in achieving this target. Further, this target payout ratio can be achieved with the company’s attempts of moderating its capital expenditure levels at Southern California Edison.

The continuous increase in dividend reflects the company’s focus on balancing dividend growth and increase in shareholder’s value. Moreover, the company seems to be making the best use of its liquidity position with a cash balance of $1.08 billion.
 
In September this year, the company announced that as a part of Edison SmartConnect program, it plans to install smart electric meters in the San Joaquin Valley. Edison SmartConnect is a $1.6 billion program authorized by the California Public Utilities Commission. Edison SmartConnect meters are digital, safe and mutual communicating devices. The company will replace the traditional mechanical meters, which would result in the transition of electric system into a smart grid.

The company expects its sustained energy conservation to reduce greenhouse gas emissions and smog forming pollutants by an estimated 365,000 metric tons per year, which is equivalent of removing 79,000 cars from the road. These meters will allow the residential and small business customers to benefit from new energy and cost-saving programs and services in the near term.

With its 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. Going forward, key growth drivers for the company are consistent performance of its stable utility operations, California's supportive regulatory environment, steep growth in the rate base, incremental dividend, and ongoing alternative energy projects, which is in line with the renewable energy mandate.

However, we remain concerned due to the tepid economy, volatile gas prices and the pending regulatory approval for recovery of capital expansion costs. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Another power provider company Dominion Resources Inc. (D - Snapshot Report) also recently hiked its dividend rate to $2.25 per share for 2013, reflecting a 6.6% increase from $2.11 per share in 2012.

California-based Edison International is a utility holding company operating through its principal subsidiaries: Southern California Edison Company, Edison Mission Energy, and Edison Capital.

Encouraging News for Shire

Shire plc (SHPG - Analyst Report) recently received some encouraging news from Europe regarding its attention deficit/hyperactivity disorder (ADHD) drug, Vyvanse (proposed trade name in Europe: Elvanse). The Ireland based company announced a favorable outcome from the European Decentralised Procedure (DCP) regarding its ADHD drug, which will be marketed as Tyvense in Ireland.

We note that the drug is marketed in the US and Canada under the trade name Vyvanse, for treating ADHD in children, adolescents and adults. Moreover, the drug is marketed in Brazil under the trade name Venvanse for treating children in the age-group of 6-12 years suffering from ADHD.

Elvanse will be marketed in Europe (on approval) for treating children aged 6 years and above following inadequate response to methylphenidate therapy. We note that the UK Medicines and Healthcare products Regulatory Agency (MHRA) was the reference member state on behalf of seven other European nations (Denmark, Finland, Germany, Ireland, Norway, Spain and Sweden), which participated in the process. The countries have agreed regarding labeling of the drug. The approval to market the drug in the individual European countries will be issued by the respective regulatory authorities.  The process is expected to consume one to three months more. The MHRA accepted the ADHD drug for review in January 2012.

We note that Vyvanse is one of the most widely prescribed ADHD therapies in the US. Approval in additional markets would further boost the sales potential of the drug. The ADHD market offers significant commercial potential. Apart from Shire, the ADHD market boasts of players, such as Johnson & Johnson (JNJ - Analyst Report) and Novartis (NVS - Analyst Report).

We currently have a Neutral recommendation on Shire. It carries a Zacks #3 Rank (Hold rating) in the short run.

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