Edison International Upgraded Amid California Wildfires: Here's Why

As California grapples with devastating wildfires, Edison International (EIX) has been upgraded to 'Neutral' by Ladenburg Thalmann, with analysts suggesting that the worst-case scenario has already been factored into the stock price. This upgrade comes amidst ongoing power outages and safety concerns, raising questions about the company's resilience and long-term prospects. Let's delve into the reasons behind this upgrade and explore the potential implications for investors.



Edison International, through its subsidiary Southern California Edison (SCE), has been proactive in addressing the wildfire situation. As of January 12, 2025, SCE has restored power to over 500,000 customers, with efforts continuing around the clock. The company has also filed Electric Safety Incident Reports (ESIRs) for the Eaton and Hurst Fires, and announced a $1 million contribution to support wildfire relief efforts. These proactive measures demonstrate Edison International's commitment to customer safety and community support, which is likely to bolster its reputation and maintain customer trust.

However, the ongoing wildfires and power outages pose significant challenges to Edison International's operations and financial performance. As of January 12, 2025, 62,662 customers remain without power, with restoration potentially taking weeks in severely affected areas. The company's equipment is also under investigation in connection with the Eaton and Hurst Fires, which could lead to legal and financial repercussions if found liable.

Despite these challenges, Edison International's wildfire mitigation efforts have significantly reduced the risk of catastrophic fires. The company has invested over $1.8 billion last year on work aimed at mitigating the risk of wildfires, including installing electric lines with a coating that greatly reduces the risk of fire. These proactive measures have helped to minimize potential financial losses and maintain customer trust.

Moreover, the establishment of the $21-billion wildfire fund, split equally between shareholders and utility customers, provides an additional layer of protection for Edison International. If the company is ultimately held responsible for the Eaton or Paradise fire, it can tap into the wildfire fund to cover losses after paying the first $1 billion on its own. This arrangement is crucial for Edison International, as it could face exorbitant financial costs without the fund.

In conclusion, Edison International's upgrade to 'Neutral' by Ladenburg Thalmann reflects the company's proactive response to the ongoing wildfires in California. While the situation remains challenging, Edison International's commitment to customer safety, community support, and wildfire mitigation efforts bode well for its long-term prospects. Investors should monitor the company's progress and potential legal and financial repercussions as the investigations into the Eaton and Hurst Fires continue.