Edison International (EIX): Rising Capex, Shrinking Free Cash Flow and the Wildfire Overhang

Earnings and the Immediate Numbers: Revenue Up, Free Cash Flow Negative, Leverage Elevated#

Edison International ([EIX]) closed FY2024 with $17.60B of revenue and $1.55B of net income, while generating - $693MM of free cash flow and carrying $37.57B of net debt at year-end — a mix that spotlights the tension between regulated earnings and heavy grid investment. According to Edison International’s FY2024 filings (filed 2025-02-27), revenue increased +7.72% year-over-year while operating cash flow jumped to $5.01B, driven by working-capital improvements and higher reported operating earnings, but capital spending of $5.71B pushed free cash flow negative for the second consecutive year EIX FY2024 Form 10-K.

The headline creates an immediate contrast: rising operating cash generation alongside heavy investment in the grid that converts stable regulated earnings into recurring negative free cash flow. That dynamic shapes near-term financial flexibility and is the central lens through which investors should assess dividend durability, credit metrics, and the company’s ability to fund wildfire liabilities or regulatory disallowances without dramatic operational changes.

How the FY2024 Numbers Fit Together (and why they matter)#

Edison’s FY2024 income statement shows a continued recovery in margins and profitability versus 2022 and 2023. Revenue of $17.60B rose +7.72% from $16.34B in 2023, while net income increased +9.93% to $1.55B. EBITDA for the year was $6.37B, and reported operating income was $2.93B, with a gross-profit ratio around 41.01% for the year, reflecting the regulated, asset-heavy nature of the utility business and relatively stable gross margins EIX FY2024 Form 10-K.

However, cash-flow dynamics tell a different story. Operating cash flow rose to $5.01B from $3.40B in 2023 (an improvement of +47.35%), but capex of $5.71B exceeded operating cash flow by roughly $700MM, producing negative free cash flow of - $693MM. Put differently, Edison is successfully converting regulated earnings into cash but is investing at a pace that outstrips near-term cash generation. That investment profile is intentional — grid hardening, undergrounding, and system modernization are capital-intensive and necessary in California’s regulatory and hazard environment — but it constrains discretionary uses of cash, including share buybacks or rapid balance-sheet repair.

A table below summarizes the headline income-statement trends across the last four fiscal years and shows the revenue and net-income trajectory that underpins investor expectations.

Income statement trends (2021–2024)#

(Income-statement figures from Edison International FY2024 filings; amounts in USD) EIX FY2024 Form 10-K.

Balance sheet, liquidity and leverage: the structural constraints#

Edison’s balance sheet at year-end 2024 shows total assets of $85.58B with property, plant & equipment net of $60.43B, offset by total liabilities of $67.84B and total shareholders’ equity of $15.56B. Total debt stood at $37.76B, producing a debt-to-equity ratio (total debt / equity) of ~242.71% by our calculation (37.76 / 15.56 = 2.4271). Net debt (total debt less cash and short-term investments) of $37.57B divided by reported FY2024 EBITDA of $6.37B yields a net-debt-to-EBITDA multiple of ~5.90x (37.57 / 6.37 = 5.90).

Those leverage metrics are material because they push Edison toward the higher end of utility leverage norms and elevate sensitivity to rating actions. Note: the dataset contains a trailing-twelve-month net-debt-to-EBITDA figure of 4.81x; we highlight the difference because our calculation intentionally uses year-end net-debt and FY2024 EBITDA for a transparent, point-in-time leverage snapshot. Differences between TTM metrics and point-in-time calculations can reflect timing, different EBITDA adjustments or intra-year debt/asset movements, and we recommend investors be explicit about which basis they use when tracking leverage.

Cash balances also show a point of attention. The cash-flow statement lists cash at end-of-period of $684MM, while the balance sheet reports cash and cash equivalents of $193MM. This discrepancy likely reflects classification differences between cash, restricted cash, and short-term investments or post-balance-sheet classification reclassifications; it warrants monitoring because available liquidity is critical when capex is outpacing operating cash flow.

Balance sheet & cash-flow highlights (2021–2024)#

(Data from company filings; capex shown as investments in property, plant & equipment divided by revenue)

Capital allocation: dividends, buybacks and the paradox of negative free cash flow#

Edison continued shareholder returns in FY2024: dividends paid totaled $1.29B and common stock repurchases were $856MM. That combination — nearly $2.15B of shareholder returns in a year with - $693MM free cash flow — signals that management prioritized a continuation of returns even while balance-sheet repair and capex needs persisted. On a per-share basis, TTM dividend per share is $3.2625, and TTM net income per share is reported at $7.47, which implies a dividend payout ratio (dividend per share / EPS TTM) of ~43.68% (3.2625 / 7.47 = 0.4368). That payout ratio is an important framing metric because it aligns dividends with reported earnings rather than with consolidated cash flows.

The persistence of buybacks alongside negative free cash flow and rising net debt creates a capital-allocation tension. Share repurchases reduce outstanding shares and support EPS, but they consume liquidity at a time when capex is structurally high and the utility faces wildfire litigation/regulatory uncertainty in its service territory. The board’s choice to continue both dividends and buybacks suggests a commitment to returning capital, but it also increases the company’s sensitivity to adverse events or regulatory disallowances.

Wildfire liabilities and regulatory context: quantifying the risk#

Wildfire litigation and regulatory cost-recovery decisions remain the most important non-financial variable affecting Edison’s balance sheet. California’s AB 1054 (the Wildfire Fund framework) provides a statutory backstop and cost-sharing mechanism, but recovery is not automatic and CPUC prudency reviews can result in disallowances that shift losses onto shareholders. Because outcomes are binary and potentially large, they function as asymmetric downside risks to earnings and equity cushion.

Quantifying wildfire exposure requires three inputs: (1) the aggregate value of civil claims and settlements; (2) available insurance proceeds and contractual limits; and (3) regulator decisions on cost recovery. Edison’s public filings disclose reserving practices and insurance positions, but not always precise forward-looking loss estimates, so investors must treat large wildfire outcomes as low-probability, high-impact tail events.

From a financial-metrics standpoint, the immediate vulnerabilities are clear: the company’s net-debt-to-EBITDA of ~5.90x and capex intensity reduce flexibility to absorb multi-billion-dollar disallowances without raising additional capital or curtailing shareholder returns. The existence of the Wildfire Fund reduces but does not eliminate the risk; CPUC rulings and litigation settlements will determine the final shareholder exposure in specific cases. For background on the statutory framework, see California AB-1054 context California Legislature — AB-1054.

Market pricing and valuation signals#

As of the latest quote in the dataset, Edison’s share price was $55.38 with a market capitalization of ~$21.31B. That price embeds a TTM PE of roughly 7.42x (price / TTM EPS 7.47) and a dividend yield of ~5.89% (3.2625 / 55.38), both indicators that the market is pricing significant risk and income return into the stock. Using a simple enterprise-value calculation (market cap + net debt = EV ≈ $58.88B) and FY2024 EBITDA of $6.37B, we calculate an EV/EBITDA of ~9.24x (58.88 / 6.37). This EV/EBITDA is higher than some published EV/EBITDA figures in the dataset (which report 7.42x); again, differences stem from varying definitions of enterprise value, timing of debt measures, and EBITDA adjustments. Our approach is transparent and uses year-end net debt plus market capitalization to create a point-in-time EV.

The market’s relatively low PE and elevated dividend yield reflect a combination of stable regulated earnings, meaningful capital-intensity, and the perceived probability of regulatory or litigation setbacks. Analysts’ forward PE projections in the dataset (forward PE around 9.01x for 2025) imply modest EPS growth baked into the price, but the path to improved valuation requires either lower perceived tail risk, faster deleveraging, or demonstrable increases in regulated rate base and ROE underwriting.

Historical patterns and management execution#

Edison has consistently invested heavily in plant and equipment — FY2021–FY2024 capex averaged roughly 33–37% of revenue — reflecting a multi-year strategic emphasis on grid hardening, undergrounding and resilience measures. That long-term pattern of investment fits the regulatory environment in California, where utilities need to demonstrate prudency and proactive mitigation to maintain cost-recovery allowances. When comparing Edison to other large California IOUs, the pattern is similar: high capex intensity, elevated balance-sheet leverage, and dividend-focused shareholder returns. Where Edison’s execution matters is in preserving regulatory goodwill (prudent spending) and containing litigation exposure through demonstrable safety investments. Historically, management has maintained the dividend while sequencing buybacks and debt issuance — a pattern that has continued through FY2024.

Key Takeaways#

Edison International enters FY2025 with a combination of stable regulated earnings, heavy capital investment, and elevated leverage. The company reported $17.6B revenue and $1.55B net income in FY2024 while producing - $693MM free cash flow and carrying $37.57B net debt. Dividend policy remains intact (TTM dividend-per-share $3.2625, payout ≈ 43.7%), and shareholder returns continued via $856MM of buybacks in 2024 despite negative free cash flow. These facts create a capital-allocation tension between sustaining returns and rebuilding balance-sheet flexibility.

What This Means For Investors#

Investors should view Edison through three interlinked lenses: regulated earnings stability, capex trajectory, and litigation/regulatory tail risk. Stable revenue and improved operating cash flow show operational resilience, but capex that consistently exceeds operating cash flow increases dependence on debt and capital markets to fund the utility’s modernization agenda. Net-debt-to-EBITDA near 5.90x and high capex intensity reduce the buffer against large, unforeseen liabilities such as significant wildfire-related disallowances.

The dividend is currently supported by reported earnings (payout ~43.7%), not by free cash flow. That distinction matters: a sudden requirement to fund wildfire liabilities out of cash rather than through rate recovery or insurance could pressure free cash flow and force difficult capital-allocation choices. Management’s continued buybacks alongside dividends in a negative-FCF year signals a deliberate policy choice to support EPS and shareholder returns, but it reduces immediate liquidity headroom and makes the company more sensitive to adverse regulatory outcomes.

Investors tracking [EIX] should monitor four specific, data-driven signals: (1) CPUC prudency decisions and any changes to AB 1054 or cost-recovery rules; (2) reserve builds and insurance-recovery disclosures in SEC filings; (3) quarterly free-cash-flow evolution relative to capex; and (4) net-debt trends and maturity profiles that affect refinancing risk. Improvements in any of these areas — demonstrable insurance recoveries, favorable CPUC rulings, or an acceleration of operating cash flow relative to capex — would materially reduce downside tail risk. Conversely, large reserve increases, adverse CPUC rulings or unexpectedly large settlements would increase funding needs and could force a re-prioritization of shareholder returns.

Forward-looking considerations (data-based)#

Near-term upside for Edison’s capital structure hinges on two levers: rate-base growth and deleveraging through sustained operating cash flow. The company’s FY2024 cash generation suggests the first priority should be improving the ratio of operating cash flow to capex (either by moderating capex pace or by securing higher allowed returns on new rate base to improve cash conversion). Over the medium term, achieving a net-debt/EBITDA in the mid-4x range would materially reduce rating and borrowing-cost risks; doing so requires either accelerated FCF recovery or slower buybacks/dividends until leverage is lower.

On the regulatory front, AB 1054 remains a meaningful backstop but not a guarantee of full shareholder protection. The CPUC’s prudency findings and the timing of any large wildfire settlements will determine whether costs are recovered from ratepayers or absorbed by Edison shareholders. Tight disclosure and transparent reserving will be critical for investors to price outcomes correctly.

Conclusion#

Edison International’s FY2024 results present a clear and actionable story: the company is producing stable regulated earnings and improved operating cash flow, yet it continues to spend heavily such that free cash flow remains negative and net leverage is elevated at roughly 5.90x net-debt-to-EBITDA by our point-in-time calculation. Management’s choice to continue dividends and accelerate buybacks in this environment highlights a prioritization of shareholder distributions over immediate deleveraging. The principal single risk that could overturn the current equilibrium is a significant wildfire-related cost that is not recovered through rates or insurance — an outcome that would materially stress cash flow and force hard capital-allocation decisions.

Investors monitoring [EIX] should focus on CPUC rulings, reserve disclosures, quarterly free-cash-flow trends relative to capex, and changes in net-debt levels. Those data points will determine whether Edison’s combination of regulated earnings plus high capex becomes a durable investment narrative or a constrained one where dividends and buybacks must be rebalanced against the need for balance-sheet repair.

(Company filings referenced: Edison International FY2024 filings, filed 2025-02-27; stock quote context from market snapshot Yahoo Finance EIX; regulatory context from California AB-1054 California Legislature — AB-1054.