Morningstar

The Best Opportunity Among California Utilities

The Best Opportunity Among California Utilities
Securities In This Article
Edison International
(EIX)
PG&E Corp
(PCG)

Travis Miller: California utilities are back in the news yet again. Back in January, PG&E declared bankruptcy. That set off a wild ride for most of the California utilities, especially PG&E but also Edison International and Sempra Energy. Most recently, the California governor Gavin Newsom came out with a plan to save the utilities and protect their future. This got investors very excited, and PG&E stock was up 21%, and we think now it's at the point where it's well beyond any kind of reasonable evaluation coming out of bankruptcy. We think the stock is worth more like $12.50 as it comes out of bankruptcy, not the $23.00 where it ended after Governor Newsom's announcement. Edison International, we think, is a good pick. It enjoys all the upside that PG&E will benefit from in new policies in California but still remains slightly below our fair value estimate even after a recent increase in the price. We like its 3.5% yield and 6% earnings growth, giving a total return for investors at a very good 9%-plus.

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About the Author

Travis Miller

Strategist
More from Author

Travis Miller is a strategist, AM Resources, for Morningstar*. He covers energy and utilities. North American regulated utilities and independent power producers have been the main focus of his research for more than 17 years. The companies in his coverage include some of the largest U.S. utilities as well as a mix of small- and mid-cap utilities.

Before joining Morningstar in 2007, he was a reporter for several Chicago-area newspapers, including the Daily Herald in Arlington Heights, Illinois. Previously, Miller was director of the utilities equity research team at Morningstar.

Miller holds a bachelor’s degree in journalism from Northwestern University’s Medill School of Journalism. He also holds a master’s degree in business administration from the University of Chicago Booth School of Business, with concentrations in accounting and finance. He is a Level III candidate in the Chartered Financial Analyst® program.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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