Edison Q2 Beat Reinforces Earnings, But Wildfire Overhang Keeps Rating at WAIT

What happened

Edison International reported second-quarter 2026 net income of $534 million, or $1.39 per share, up sharply from $343 million, or $0.89 per share, a year earlier, with adjusted core earnings of $592 million, or $1.54 per share, versus $374 million, or $0.97 per share. The strong results reflect the utility’s regulated rate-base growth and disciplined cost management, but they do not address the central uncertainty flagged in the DeepValue master report: the Eaton Fire liability remains probable with no estimable loss range, and SB 254 excludes $2.9 billion of wildfire mitigation capex from the equity portion of rate base. While the earnings beat demonstrates the resilience of SCE’s cash flows, the stock’s primary risk driver—unquantified wildfire exposure and potential credit-rating pressure—remains unchanged. The company’s disclosure language and the upcoming bellwether trial in January 2027 keep the left-tail risk alive, making today’s report a positive but insufficient catalyst to warrant a rating upgrade. As a result, the WAIT rating stays in place, with Trim Above $85 and attractive entry near $60 still defining the risk-reward framework.

Implication

The second-quarter earnings beat demonstrates SCE’s ability to generate strong regulated returns and support the dividend, but it fails to shrink the wide distribution of outcomes tied to the Eaton Fire. With management still unable to estimate a loss range and SB 254 excluding $2.9 billion of mitigation capex from equity rate base, the stock’s risk-adjusted value is capped. Investors should use any price strength toward the $85 trim level to reduce exposure, while waiting for either a quantified Eaton Fire loss range or stabilizing credit signals before considering entry near $60. The report does not alter the base-case implied value of $75 or the conviction that a clearer wildfire liability picture is needed for a rating change.

Thesis delta

The Q2 earnings beat adds modest near-term support to EIX's cash flow narrative but does not shift the investment thesis materially. The Eaton Fire exposure remains the dominant driver of upside/downside asymmetry, with no new disclosure on loss quantification. SB 254 exclusions continue to dilute the earnings power of the planned capex, reinforcing the WAIT rating until wildfire liabilities become bounded.