Hawaiian Electric Beats on Earnings, Lags Rev

Zacks Equity Research

Hawaiian Electric Industries Inc. (HE) posted fourth quarter 2013 core earnings of 39 cents per share, beating the Zacks Consensus Estimate by 2 cents. The quarterly figure, however, was in line with the year-ago profit level.

The results reflect a strong operational performance and the proficient use of monetary resources.

Full-year 2013 earnings came in at $1.62 per share, down 3.6% from the year-earlier figure of $1.68. The weak result was due to earnings declines at both American Savings Bank and Hawaiian Electric Company.

Operating Statistics

Total revenue at the end of the reported quarter was $826.4 million, down 1.4% year over year. Reported results were also below the Zacks Consensus Estimate of $915.0 million. The downside reflects lower electric utility as well as bank sales.

Total expenses were down 5.8% year over year to $754.2 million. Total operating income was $72.3 million, up 94% year over year.

Quarterly Segmental Net Income

Electric Utility: Segment net income increased 11.5% year over year to $32.0 million. The results reflect lower operations and maintenance expense, partially offset by higher depreciation expense.

Banking: Hawaiian Electric’s Banking segment recorded net income of $12.2 million in the reported quarter, down 15.2% from $14.4 million in the year-ago quarter. The year-over-year decrease was due to lower non-interest income and lower provision for loan losses.

Other: The segment digested a quarterly net loss of $5.2 million, wider than the year-earlier loss of $4.8 million.

Financial Update

Cash and cash equivalents as of Dec 31, 2013, were $220.0 million, up from $219.7 million as of Dec 31, 2012. Long-term debt, net other than bank was $1,492.9 million, higher than the 2012 level of $1,422.9 million.

Peer Reviews

Exelon Corporation (EXC) announced fourth-quarter 2013 adjusted operating earnings of 50 cents per share, missing the Zacks Consensus Estimate by 5.7%. Quarterly earnings plunged 21.9% year over year due to a decline in realized energy prices and higher depreciation and amortization expenses.

Dominion Resources, Inc. (D) reported fourth-quarter 2013 operating earnings of 80 cents per share, missing the Zacks Consensus Estimate by 9.1%.

Our Take

Though Hawaiian Electric’s bottom line succeeded in beating the Zacks Consensus Estimate, the top line fell short. Going forward, lower electricity volume sales, a tourism-dependant Hawaiian economy and uncertainty over the Japanese economy keep us concerned.

However, the company is progressing smoothly to comply with the Hawaii Clean Energy Initiative that calls for generating 70% of its energy needs from renewable sources by 2030. In 2013, Hawaiian Electric Company has already provided nearly 18% of customers' electricity usage from renewable sources. This is higher than the 2015 renewable portfolio standard of 15%. The company is also engaged in the issuance of shares for its capital needs.

The company presently has a Zacks Rank #4 (Sell). In the near term, we would advise investors to accumulate its Zacks Ranked #1 (Strong Buy) peer Otter Tail Corporation (OTTR).

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