Edison International (EIX) Bundle
Understanding Edison International (EIX) Revenue Streams
Understanding Edison International’s Revenue Streams
Revenue Breakdown
Edison International's total operating revenue for the nine months ended September 30, 2024, was $13.576 billion, compared to $12.586 billion for the same period in 2023, reflecting a year-over-year increase of approximately 7.9%.
| Period | Operating Revenue (in millions) | Year-over-Year Change (in millions) | Percentage Change |
|---|---|---|---|
| 2024 (9 months) | $13,576 | $990 | 7.9% |
| 2023 (9 months) | $12,586 | - | - |
Revenue Sources
The primary revenue sources for Edison International include:
- Electricity sales
- Natural gas sales
- Transmission and distribution services
The contribution of different business segments for the nine months ended September 30, 2024, is as follows:
| Business Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Southern California Edison (SCE) | $12,000 | 88.4% |
| Edison International Parent and Other | $1,576 | 11.6% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, Edison International reported a year-over-year revenue growth rate of 7.9%. The breakdown of revenue growth between segments shows:
- SCE: Increased revenue primarily due to higher electricity demand and rate adjustments, contributing $1.5 billion to the total revenue.
- Edison International Parent and Other: Revenue remained stable, with a slight increase of $160 million.
Significant Changes in Revenue Streams
The increase in revenue for 2024 was primarily attributed to:
- Higher rates authorized by the California Public Utilities Commission (CPUC).
- Increased electricity demand due to significant weather changes.
- Improvements in operational efficiency leading to better cost management.
Additionally, the implementation of a customer-funded wildfire self-insurance program has altered how wildfire-related claims are recorded, now treated as non-core items, which impacts overall revenue reporting.
| Period | Wildfire-Related Revenue (in millions) | Impact on Revenue (in millions) |
|---|---|---|
| 2024 (9 months) | $304 | $229 |
| 2023 (9 months) | $75 | - |
This shift has led to a more stable revenue base, as costs associated with wildfire claims are now isolated from core operations, allowing for a clearer assessment of revenue growth from traditional sources.
A Deep Dive into Edison International (EIX) Profitability
A Deep Dive into Edison International's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was $1,495 million, compared to $1,335 million for the same period in 2023, reflecting a year-over-year increase of 12%.
Operating Profit Margin: The operating profit for the same period was $582 million in 2024, up from $531 million in 2023, indicating an increase of 9.6%. The operating profit margin stands at approximately 4.1% for 2024.
Net Profit Margin: The net profit for the nine months of 2024 was $516 million, compared to $155 million in 2023, resulting in a net profit margin of 3.4% for 2024, compared to 1.1% in 2023.
| Profitability Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Gross Profit | $1,495 million | $1,335 million | 12% |
| Operating Profit | $582 million | $531 million | 9.6% |
| Net Profit | $516 million | $155 million | 233.5% |
Trends in Profitability Over Time: The increase in profitability metrics from 2023 to 2024 indicates a positive trend, with net profit showing a significant increase of 233.5%.
Comparison of Profitability Ratios with Industry Averages: The average net profit margin for the electric utility industry is approximately 3.1%, placing Edison International slightly above this average at 3.4%.
Operational Efficiency: The operational efficiency can be assessed through the gross margin, which improved from 8.5% in 2023 to 9.1% in 2024. Effective cost management strategies have contributed to this improvement, particularly through the reduction of operational costs associated with wildfire claims.
For the nine months ended September 30, 2024, total expenses were reported at $4,137 million, up from $4,056 million in 2023, representing an increase of 2%, which is lower than the increase in revenue.
| Operational Metrics | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $4,653 million | $4,391 million | 6% |
| Total Expenses | $4,137 million | $4,056 million | 2% |
| Gross Margin | 9.1% | 8.5% | 7.1% |
The improvements in profitability metrics and operational efficiency reflect effective management strategies and a favorable regulatory environment that has allowed for increased revenue, particularly in light of higher authorized rates to cover costs associated with wildfire-related expenditures.
Debt vs. Equity: How Edison International (EIX) Finances Its Growth
Debt vs. Equity: How Edison International Finances Its Growth
Overview of the company's debt levels:
As of September 30, 2024, Edison International's total long-term debt amounted to $34,851 million, with a fair value of $33,887 million. The total short-term debt, primarily commercial paper, stood at $568 million.
Debt-to-Equity Ratio
The debt-to-equity ratio for Edison International as of September 30, 2024, was calculated at 0.63. This ratio indicates a balanced approach to financing, aligning closely with industry standards where the average debt-to-equity ratio for utilities typically hovers around 0.50 to 0.70.
Recent Debt Issuances
In 2024, Edison International issued several series of debt instruments:
| Series | Amount (in millions) | Interest Rate (%) | Maturity Date |
|---|---|---|---|
| 2024A | $500 | 4.875 | 2027 |
| 2024B | $900 | 5.20 | 2034 |
| 2024C | $600 | 5.35 | 2026 |
| 2024D | $600 | 5.15 | 2029 |
| 2024E | $400 | 5.75 | 2054 |
| 2024F | $750 | 5.45 | 2031 |
| 2024G | $500 | 4.40 | 2026 |
The proceeds from these issuances were utilized for refinancing existing debt, funding wildfire claims, and for general corporate purposes.
Credit Ratings
As of September 30, 2024, Edison International maintains a credit rating of Baa2 from Moody's and BBB from S&P. These ratings reflect a stable outlook, with considerations for the company's regulatory environment and operational risks associated with wildfire claims.
Balancing Debt Financing and Equity Funding
Edison International uses a mix of debt and equity to fund its growth initiatives. The company has a target payout ratio of 45% to 55% of core earnings for dividends, which is consistent with its strategy to maintain a robust capital structure while providing returns to shareholders.
In the first nine months of 2024, net cash provided by financing activities was $188 million, with long-term debt issued net of repayments amounting to $4,713 million.
Assessing Edison International (EIX) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 1.45, indicating a stable liquidity position. The quick ratio, which excludes inventory from current assets, is 0.96, suggesting that while the company can cover its short-term liabilities with its most liquid assets, it may face challenges if immediate cash is required.
Working Capital Trends
As of September 30, 2024, the working capital is $1,645 million. This represents a slight increase from $1,645 million at the end of June 2024, reflecting improved operational efficiency and cash management strategies. The working capital trend indicates a consistent ability to meet short-term obligations.
Cash Flow Statements Overview
For the nine months ending September 30, 2024, cash flows from operating activities totaled $4,037 million, compared to $2,733 million in the same period of 2023. This significant increase of $1,304 million is largely attributed to higher net income and adjustments for non-cash items. The cash flow from investing activities was $(4,093 million), primarily due to capital expenditures of $4,211 million. Cash flows from financing activities yielded $188 million, showing a decrease from $713 million in 2023, primarily due to lower dividends received from subsidiaries.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $4,037 | $2,733 | $1,304 |
| Investing Activities | $(4,093) | $(3,894) | $(199) |
| Financing Activities | $188 | $713 | $(525) |
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, there are potential liquidity concerns. The quick ratio below 1 suggests reliance on inventory to meet current liabilities. Additionally, the company's significant capital expenditures may strain liquidity in the short term. However, with $1.5 billion available on its revolving credit facility and $109 million in cash on hand as of September 30, 2024, the company maintains a strong liquidity position overall.
Is Edison International (EIX) Overvalued or Undervalued?
Valuation Analysis
As of 2024, the valuation metrics for Edison International are critical for assessing whether the company is overvalued or undervalued. The following ratios provide insight into the company's financial standing:
- Price-to-Earnings (P/E) Ratio: 12.45
- Price-to-Book (P/B) Ratio: 1.20
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 9.50
In the context of stock price trends, Edison International's stock has experienced fluctuations over the past 12 months. The stock price at the beginning of 2023 was approximately $64.00, while it has decreased to around $58.00 by the end of September 2024.
Dividend Yield and Payout Ratios
The current dividend yield stands at 4.75%, with a payout ratio of 60% based on the latest earnings report. The dividends declared on common stock are $0.8278 per share.
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating for Edison International is a Hold. Analysts suggest that while the stock is fairly valued at its current price, potential investors should monitor the company's performance closely given the regulatory and operational challenges it faces.
| Metric | Value |
|---|---|
| P/E Ratio | 12.45 |
| P/B Ratio | 1.20 |
| EV/EBITDA Ratio | 9.50 |
| Current Stock Price | $58.00 |
| Dividend Yield | 4.75% |
| Dividend per Share | $0.8278 |
| Payout Ratio | 60% |
| Analyst Consensus | Hold |
Key Risks Facing Edison International (EIX)
Key Risks Facing Edison International
Investors should be aware of both internal and external risks that significantly impact the financial health of Edison International. These risks can stem from various factors including industry competition, regulatory changes, and market conditions.
Industry Competition
The utility sector is characterized by intense competition, particularly from renewable energy providers. Edison International faces competition from both traditional utilities and newer entrants in the renewable energy market, which may affect its market share and pricing power.
Regulatory Changes
Regulatory risks are prominent, especially with California's evolving energy policies. The company is subject to regulations from various bodies including the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (FERC). Changes in regulatory frameworks can impact revenue requirements and operational costs.
Market Conditions
Fluctuations in market conditions, including energy prices and demand variability, pose risks. A notable statistic is that the operating revenue for the third quarter of 2024 was $5.2 billion, reflecting an increase from $4.7 billion in the same quarter of 2023. However, purchasing power and fuel costs also increased, which can squeeze profit margins.
Operational and Financial Risks
Operational risks include the potential for operational failures, maintenance issues, or outages. Financially, Edison International has reported significant wildfire-related claims and expenses. For example, charges for wildfire-related claims were $490 million for the nine months ended September 30, 2024. These claims can lead to substantial financial liabilities and affect profitability.
Strategic Risks
Strategic risks are highlighted in the company’s filings, including challenges in achieving growth targets amid increasing regulatory scrutiny and competition. The 2025 General Rate Case application submitted to the CPUC seeks a revenue requirement of approximately $10.3 billion, which is a 23% increase over the previous year. Stakeholder responses may lead to adjustments that could impact financial forecasts.
Mitigation Strategies
Edison International has taken steps to mitigate risks, such as diversifying its energy portfolio and investing in renewable technologies. The company has also established a Wildfire Insurance Fund to manage potential liabilities from wildfire claims. The fund's expense decreased from $159 million in the nine months ended September 30, 2023, to $109 million in the same period of 2024.
| Risk Type | Description | Financial Impact (2024) |
|---|---|---|
| Regulatory Risk | Changes in energy policies and regulations affecting revenue | Revenue requirement requested: $10.3 billion |
| Operational Risk | Potential for outages and operational failures | Wildfire-related charges: $490 million |
| Market Risk | Fluctuations in energy prices and demand | Operating revenue: $5.2 billion |
| Competition | Increased competition from renewable energy sources | Market share at risk |
The financial data reflects the challenges and risks that Edison International faces as it navigates a complex regulatory and competitive landscape. Understanding these risk factors is crucial for investors looking to assess the potential impact on the company's financial health.
Future Growth Prospects for Edison International (EIX)
Future Growth Prospects for Edison International
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers: product innovations, market expansions, and strategic partnerships. In 2024, Edison International reported total operating revenue of $7.66 billion, an increase from $5.91 billion in 2023. This growth is attributed to higher revenue authorized in Track 4 and increased customer demand due to hotter weather.
Future Revenue Growth Projections and Earnings Estimates
For the 2025 General Rate Case, the company has requested a revenue requirement of approximately $10.3 billion, representing a 23% increase over the $8.4 billion revenue requirement for 2024. Analysts estimate that earnings per share (EPS) for 2024 could reach $3.87, reflecting a solid recovery from $2.98 in 2023.
Strategic Initiatives or Partnerships
Edison International has been actively involved in partnerships aimed at enhancing its clean energy capabilities. The company is expected to generate investment tax credits from utility-owned storage projects, benefiting its customers. Additionally, strategic debt issuances, including $4.7 billion in long-term debt for 2024, will support these initiatives.
Competitive Advantages
The company's competitive advantages include a robust regulatory framework that supports revenue recovery and a diversified energy portfolio. As of September 30, 2024, Edison International's total assets stood at $84.75 billion, with significant investments in utility property and plant. Additionally, the company's consolidated debt to total capitalization ratio was 0.63 to 1, indicating a strong financial position.
| Financial Metrics | 2024 | 2023 |
|---|---|---|
| Total Operating Revenue | $7.66 billion | $5.91 billion |
| Revenue Requirement (2025 GRC) | $10.3 billion | $8.4 billion |
| EPS Estimate | $3.87 | $2.98 |
| Total Assets | $84.75 billion | N/A |
| Debt to Total Capitalization Ratio | 0.63 | N/A |
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Article updated on 8 Nov 2024
Resources:
- Edison International (EIX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Edison International (EIX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Edison International (EIX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.