PG&E Earnings: State Wildfire Policies and Regulatory Support for Growth Plan Are Key in 2026

Key Morningstar Metrics for PG&E

• Fair Value Estimate: $19.50
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Medium

What We Thought of PG&E’s Earnings

PG&E PCG reported $1.50 earnings per share in 2025, up from $1.36 in 2024. This is in line with our estimate and at the high end of management’s guidance range.

Why it matters: Growth investments and operating cost savings produced most of the earnings growth in 2025.

• PG&E management continues to plan for $73 billion of capital investment in 2026-30, one of the largest investment plans in the sector.
• This plan supports our view that PG&E can continue 9% annual earnings growth beyond 2028 as long as utilities rate regulation in California remains constructive.

The bottom line: We are reaffirming our $19.50 fair value estimate for PG&E and our no-moat rating.

• PG&E’s stock is up 9% year to date, making it one of the top-performing utilities. It still trades at a 10% discount to our fair value estimate, making it one of the cheapest US utilities we cover as of Feb. 12.
• Management’s 2025 EPS guidance range is $1.64-$1.66, in line with our estimate and implying 10% year-over-year growth.

Big picture: A primary concern is whether PG&E can execute its capital investment plan and grow earnings while mitigating the impact on customer bills. Part of PG&E’s strategy is sharing operating cost savings with customers.

• PG&E’s 2027-30 general rate case and 10-year undergrounding filing are key factors in PG&E’s growth plan.
• Management reaffirmed its intent to reach a 20% dividend payout ratio by 2028 and hold it there at least through 2030. Although this is much lower than most utilities’ payout ratios, it will give PG&E ample financial flexibility to fund its capital investment plan and maintain an investment-grade credit rating.

Coming up: The California Earthquake Authority, which administers the state’s AB 1054 wildfire fund, is set to make wide-sweeping policy recommendations to the governor and legislators on April 1. This ultimately could result in changes to the wildfire fund or the SB 254 continuation fund that could impact shareholders.