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On Mar 14, we retained our Outperform recommendation on Edison International (EIX - Analyst Report) following its fourth-quarter results, where reported numbers comfortably beat the Zacks Consensus Estimates. This diversified utility presently carries a Zacks Rank #2 (Buy).

Why the Reiteration?

Edison International’s fourth-quarter 2012 adjusted earnings of $1.76 per share beat both the Zacks Consensus Estimate of $1.06 and year-ago quarterly earnings of 75 cents per share.

Following the release of the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone up 7.3% to $3.51 per share as 4 of 7 estimates moved north. Moreover, the Zacks Consensus Estimate for 2014 has also increased 4.7% to $3.59 per share as 4 of 11 estimates were raised.

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. With a forward-looking regulatory backup allowing the utility to file its General Rate Cases for three years, Southern California Edison has witnessed a sharp rise in its regulated rate base in recent times. Over the past five years, the regulators allowed rate base of the utility to grow by a CAGR of approximately 11%.

In Dec 2012, the company raised its annual dividend from $1.30 per share to $1.35 per share. This comes to a very competitive dividend yield of approximately 2.87%. Going forward, with the management targeting to dish out 45% 55% of Southern California Edison’s earnings as dividend, we see ample scope for dividend appreciation.

Edison Mission Group’s future growth will come from improved performance in unregulated power generation and energy trading, higher price realizations, upcoming wind projects and a strong balance sheet with no significant near-term maturities.

Other Stocks to Consider

Other stocks to consider are Pike Electric Corporation (PIKE - Snapshot Report), Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report) and Otter Tail Corporation (OTTR - Snapshot Report) , all carrying a Zacks Rank #1 (Strong Buy).

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