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Market Pricing (2/21/2017): $77.22/share; ST-Target: $95/share; NIV: $162/share
EIX continues to strategically impress and execution is strong
We feel 2017E AEPS guidance of $4.04-$4.24 is light, but delays in regulatory approvals may be making management conservative. Strong execution, strategic evolution and focus on core strengths makes for attractive investment. Strategically, we like focus on utility projects with minimal distractions. Energy Services’ focus on advisory/consulting for C&I customers is right approach from our view. Future CAGR slips some with delayed approvals, but overall objectives and thesis intact. Exit from water business is positive, while prognosis for competitive transmission projects is disappointing, in our view. 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.