EIX 1Q2016 Earnings Note

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Market Pricing (5/2/2016): $71.44/share; ST-Target: $90/share; NIV: $157/share

EIX: Long-term growth likely to be better than currently advertised

Unsurprisingly, higher future growth expectations, and continued high levels of capital spending relative to maintenance capex looks to be accelerating valuation. Dividend payout ratio has already largely caught up to the earnings power of SCE approaching close to 50% payout ratio. We look for continued capex spending on transmission, distributed generation, electric vehicle (EV) infrastructure, select renewable generation, energy storage, grid modernization, and energy efficiency. Additional spending on EV infrastructure, transmission and the renewable energy sector or support of the renewable energy sector should drive LT APES CAGR above the 7%-9% forecast range, in our opinion. Acquisitions of utilities may be dilutive to valuations due to higher expected growth at SCE versus many utilities outside of California. Therefore, we look for valuations to move to the upside over the ST.

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