Mizuho Securities downgraded Edison International (EIX) to Neutral from Outperform and reduced its price target to $70 from $86, citing the failure of California lawmakers to pass meaningful wildfire liability reform. The downgrade follows a similar cut to Pacific Gas & Electric (PG&E), which saw its rating lowered to Neutral with a price target reduced to $16 from $21.
The California legislature adjourned without advancing SB 492 in a way that addresses the state’s wildfire fund solvency concerns. The bill, as passed, did not include provisions to replenish the fund or sever its linkage to liability caps, which remain fixed at 20% of the CPUC transmission and distribution rate base. Governor Gavin Newsom had proposed limiting wildfire fund withdrawals to $6 billion per incident and eliminating subrogation rights, but neither measure was adopted in the final legislation.
Edison International’s shares traded at $70.17 at the time of the downgrade, down 3.62% in a single session and nearly 5% over the prior week. The company maintains a dividend yield of 5%, though four analysts have revised earnings estimates downward for the upcoming period, according to InvestingPro data. PG&E’s stock fell 7.52% following its downgrade.
The downgrades reflect heightened regulatory and legal risks for utilities tied to past wildfire incidents. Edison International had briefly gained ground after a judge declined to automatically hold the company liable for a 2025 wildfire ahead of trial, but the legislative impasse has reintroduced uncertainty. Analysts at Argus also downgraded Edison International to Hold from Buy, citing liability exposure linked to equipment potentially tied to past wildfires.
Mizuho expects state utilities to attempt renewed legislative efforts in 2027, coinciding with the start of a new administration. The firm’s mid-quarter review of the U.S. energy and utilities sector found that 12 of 14 companies had outperformed earnings estimates, though wildfire-related liabilities remain a persistent overhang for California-based operators.
