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Market Pricing (11/1/2016): $72.50/share; ST-Target: $95/share; NIV: $162/share
EIX: We remain constructive on the stock; future looks bright
EIX believes it’d beat upper-end of its narrowed 2016 AEPS guidance based on lower operating/ financing costs. Management seemed positive on its California strategy, but development of Energy Services appears more costly than previously thought. Not surprisingly, higher future growth expectations, and continued high levels of capex spending relative to maintenance capex well beyond 2020 looks to accelerate valuations. Dividend payout ratio has already largely caught up to earnings power of SCE nearing close to 50%. We look for continued capex spending on transmission, distributed generation, electric vehicle (EV) infrastructure, select renewable generation, energy storage, energy efficiency and grid modernization. We feel SB32’d add to or increase capital spending, potentially in the $Bs. More spending on EV infrastructure, transmission and renewable energy sector or support of renewable energy sector should drive LT AEPS CAGR above 7%-9% forecast range, in our opinion. So, we look for valuations to move to upside over ST.