Dahlman Rose Comments On Edison International Following Earnings Release

Edison International EIX reported 1Q11 adjusted EPS of $0.62 versus consensus and the year- ago period of $0.63 and $0.82, respectively. The y/y decline was driven by results at Edison Mission Group (EMG), partly offset by an increase in earnings at Southern California Edison (SCE). EMG results declined to a loss of $0.05 from earnings of $0.22 in 1Q10 due to weaker results at Midwest Generating and Homer City, offset partially by a modest increase in wind project earnings. During the quarter, Edison's unregulated coal fleet made minor additions to its forward hedge position, but continues follow its strategy of being less hedged than the normal 50% for the prompt year. At Midwest, total 2012 hedges increased to 5.4TWh from 3.4 last quarter, or about 17% of total expected generation. The average price dropped nearly $3 to $35.25/ MWh. Edison's large capex program at SCE offers compelling growth opportunities for the company, though Dahlman continues to be concerned about compressed Midwest and PJM dark spreads as well as the need for environmental capital expenditures on the coal fleet. Dahlman is adjusting its earnings estimates to $2.73 and $2.63 for 2011 and 2012, respectively, from $2.71 and $2.62/share previously. Dahlman Rose has a Hold rating on EIX EIX closed Wednesday at $39.29