PG&E Earnings: Near-Term Regulatory Certainty Supports Industry-Leading Earnings Growth

Key Morningstar Metrics for PG&E

• Fair Value Estimate: $15.50
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Medium

What We Thought of PG&E’s Earnings

We reaffirm our fair value estimate of $15.50 per share for PG&E PCG after the company reported $0.37 of core earnings per share in its first quarter, up from $0.32 in the year-ago period after adjusting for the late 2024 general rate case decision. Results are on track to meet our full-year EPS forecast, at the high end of management’s $1.33-$1.37 guidance. We are maintaining our no-moat rating.

We still expect 9% annual earnings growth for at least the next three years—one of the fastest rates in the utilities sector. This growth is mostly locked in thanks to regulatory clarity following the resolution of the 2023-26 general rate case and California’s usage-decoupled rate structure.

PG&E has received regulatory approval to increase customer rates for nearly all of its $35 billion in capital investment planned for 2024-26. Management’s capital investment plan ramps up to nearly $14 billion annually in 2027-28, some of which regulators could reject or postpone as part of the firm’s next four-year general rate case cycle.

Management adjusted its five-year financing plan slightly, adding new equity needs beyond 2024. This is consistent with our outlook and doesn’t affect our fair value estimate. We expect the board to increase the dividend for the first time since 2017 later this year. The plan also requires the company to refinance and issue $25 billion of debt during the next five years, exposing it to higher interest rates if regulators push back on cost-of-capital customer rate increases.

PG&E’s stock trades at a slight premium to our fair value estimate after falling 6% since early January. Realizing cost savings and passing them along to customers will be key to offsetting potential bill increases related to PG&E’s capital investment plan. Investors should watch for whether management can hit its 2% annual cost savings in 2024 and beyond.