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Market Pricing (5/01/2017): $79.24/share; ST-Target: $100/share; NIV: $166/share
Despite strong beat EIX maintains guidance, which may be prudent
Even though 1Q17 results were better by $0.21 vs. ours and consensus estimate, we feel 2017E AEPS guidance of $4.04-$4.24 should be kept for now, given that the majority of the beat was due a tax benefit. Strong execution, strategic evolution and focus on core strengths makes for attractive investment. Strategically, we like focus on utility projects with minimal distractions. Preliminary decision of cost of capital proceedings were pulled and awaiting final decision. Overall objectives and thesis intact. Renewable integration’s challenging but no big surprises, yet. DC tax plan should be favorable: Likely both direct and indirect benefits. High growth likely to continue beyond 2020. Dividend payout ratio has already largely caught up to earnings power of SCE nearing close to 50%. We look for continued high capex spending on transmission, distributed generation, electric vehicle (EV) infrastructure, select renewable generation, energy storage, energy efficiency and grid modernization. LT investments should drive LT AEPS CAGR above 7%-9% forecast range, in our opinion. So, we look for ST upside valuations move.