EIX Q4 Earnings Beat Overshadowed by Cautious 2026 Guidance Amid Persistent Wildfire Risks

What happened

Edison International delivered strong Q4 2025 results with adjusted EPS surging 78% to $1.87 and revenue up 31%, driven by operational efficiency and partial recoveries from wildfire liabilities like the TKM settlement. However, the company issued 2026 guidance below consensus estimates, signaling management's caution about future earnings amid ongoing uncertainties. This guidance cut aligns with the DeepValue report's warning that wildfire tail risks, including unresolved Eaton Fire claims and pending Woolsey settlement approvals, continue to cloud the outlook. Despite the earnings beat, the underlying vulnerabilities—such as BBB- ratings with negative outlook and potential Wildfire Fund depletion—remain unaddressed, keeping the stock's risk profile elevated. Investors should see this as a reminder that short-term performance gains are insufficient to mitigate the structural challenges highlighted in filings.

Implication

The guidance miss for 2026 indicates that management is tempering expectations, likely due to unresolved wildfire exposures and regulatory delays, which reinforces the DeepValue report's view that upside is capped without clearer liability resolution. While the high dividend yield and recent earnings growth are attractive, the risk of rating downgrades or fund exhaustion could pressure the stock further, as seen in the bear case scenario of $50. Key near-term catalysts, such as the CPUC's Woolsey settlement decision and detailed Eaton disclosures, will be critical in determining whether the company can maintain investment-grade status and execute its capex plan. Investors should avoid chasing the stock at current levels and instead wait for these events to unfold, aligning with the report's recommendation for an attractive entry near $55. This approach balances the visible rate-base growth against the embedded tail risks that the earnings beat does not eliminate.

Thesis delta

The strong Q4 earnings do not alter the fundamental thesis from the DeepValue report, as they reflect past recoveries rather than a reduction in future wildfire risks. However, the lower 2026 guidance emphasizes that near-term earnings growth may be constrained, reinforcing the need for patience and a lower entry point to compensate for ongoing uncertainties. Thus, the 'WAIT' rating with an attractive entry at $55 remains valid, as the guidance cut highlights that propaganda around operational strength masks deeper vulnerabilities.