Hawaiian Electric Beats Earnings, Misses Rev - Analyst Blog
August 12 2013 - 10:05AM
Zacks
Hawaiian Electric
Industries Inc. (HE) posted second quarter 2013 earnings
of 41 cents per share, beating the Zacks Consensus Estimate of 38
cents. Also, earnings came in ahead of the year-ago figure by a
penny.
The results reflect higher bank earnings compared to the same
quarter last year. The positives were partly offset by lower
utility earnings due to a customer refund recorded in the
quarter.
Operating Statistics
Total revenue at the end of the reported quarter was $796.7
million, down 6.7% year over year. Reported results were also below
the Zacks Consensus Estimate of $830.0 million.
Segment Net Income
Electric Utility: Segment net income
declined 2.4% year over year to $28.7 million. The results reflect
higher depreciation expense, higher customer service costs and
relatively flat revenue owing to the customer refund granted in its
recent final rate case decision. However, these were partially
offset by lower operations and maintenance (O&M) expenses
because of the temporary delays in overhauls and reversals of
previously expensed costs.
Banking: Hawaiian Electric’s Banking
segment recorded net income of $15.9 million in the reported
quarter, up 12.2% from $14.2 million in the year-ago quarter. The
increase reflects a lower provision for loan losses of $2 million,
$1 million of which related to the strategic third quarter sale of
American's credit card portfolio, and $1 million higher gains on
sales of investment securities. However, these were partially
offset by lower mortgage banking income and higher non-interest
expense.
Overall, the segment continued to deliver solid results in second
quarter 2013 with a return on average equity of 12.6% and a return
on average assets of 1.25%.
Other: The segment digested a quarterly
net loss of $4.0 million, narrower than the year-ago loss of $4.8
million.
Financial Update
Cash and cash equivalents as of Jun 30, 2013, were $153.7 million,
down from $219.7 million as of Dec 31, 2012. Long-term debt, net
was $1,422.9 million, approximately flat year over year. Net cash
provided by (used in) operating activities was $130.8 million in
the first half of 2013 versus ($3.6) million in the year-earlier
period.
Guidance
Recently, Hawaiian Electric lowered its earnings guidance for 2013.
The lowered guidance reflects Maui Electric Company, Limited’s
(MECO) 2012 test year final rate case decision and order (D&O)
issued by the Public Utilities Commission of the State of Hawaii
(“PUC”).
The company expects adjusted earnings per share in the range of
$1.54 to $1.64 and GAAP earnings in the range of $1.52 to $1.62 per
share. The guidance reflects $7.8 million lower MECO annual
revenues as a result of the final D&O. With its first quarter
results, the company had issued 2013 earnings guidance in the range
of $1.58 to $1.68 per share.
For Hawaiian Electric Company, Inc., the company expects adjusted
earnings per share in the range of $1.19 to $1.25 and GAAP earnings
per share in the range of $1.17 to $1.23.
Zacks Rank
The company presently retains a short-term Zacks Rank #3
(Hold).
Going forward, we expect the company to benefit from investment in
local infrastructure. The company made $140 million of
infrastructure investments in the first half of 2013. Also, its
common stock offering would bring in capital, and a more modern
electric grid and lower-cost renewable energy would benefit
customers. The company is trying to reduce its dependence on oil
and is constantly seeking ways to increase the use of lower-cost
renewables.
Year to date, 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%.
We are nevertheless concerned about lower electricity volume sales,
a tourism-dependant Hawaiian economy and the volatile Japanese
economy.
Stocks that are well placed in the energy space are Zacks Ranked #1
(Strong Buy) Huaneng Power International, Inc.
(HNP) and UNS Energy Corp. (UNS), and Zacks Ranked
#2 (Buy) Alliant Energy Corp. (LNT).
HAWAIIAN ELEC (HE): Free Stock Analysis Report
HUANENG POWER (HNP): Free Stock Analysis Report
ALLIANT ENGY CP (LNT): Free Stock Analysis Report
UNS ENERGY CORP (UNS): Free Stock Analysis Report
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