Edison International (EIX)

On our desk, the recent 6.8% single-session drop following Q2 earnings tells you everything you need to know about market sentiment. Even though core EPS came in at US$1.54 and management reaffirmed guidance, the sentiment is completely dominated by balance sheet overhangs and wildfire policy fears. Investors are refusing to look past the legislative risks in Sacramento. If leadership fails to deliver a predictable framework this year, credit rating downgrades are practically on the table, which will immediately bloat the cost of capital for future customer-benefit investments. We are staying extremely cautious on valuation until these policy headwinds clear up.

Looking at the fundamental risks, the sheer scale of the Eaton Fire Wildfire Recovery Compensation Program is staggering. With close to 11,700 claims filed and the window open until November 30, 2026, the long-tail liabilities are very real. Management is deploying advanced technology like covered conductor failure prevention and prioritizing high-consequence ignition zones, but the legal and financial uncertainties from ongoing claims and litigation could easily pressure cash flows and skew anticipated insurance recoveries. Add in the lowered 2026 basic EPS guidance down to US$5.70–US$6.00, and you have a clear picture of compressed near-term earnings power.

From a quantitative and capital structure perspective, Edison's recent moves are quite fascinating. The cash tender offers for Series A and B preferred stock late last year, followed by the complete redemption of Series A preferred and SCE trust securities in March 2026 at par plus accrued distributions, show a calculated restructuring play. However, quantitative models must weigh these actions against the heavy capital expenditure requirements and potential CPUC rate base disputes. A forward P/E sitting near 12.0x alongside a PEG ratio over 3.3 implies that while the trailing multiple looks cheap, growth expectations are heavily constrained by regulatory friction.