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We have maintained our long-term Neutral recommendation on Hawaiian Electric Industries Inc. (HE - Analyst Report) on Sep 13, 2013.

Why Kept Neutral?

Honolulu-based Hawaiian Electric Industries Inc., incorporated in 1981, is a holding company with subsidiaries engaged in the electric utility, banking and other businesses operating primarily in the state of Hawaii.

The company came up with a positive earnings surprise with its second quarter 2013 earnings beating the Zacks Consensus Estimate by 7.9%. The results reflect higher bank earnings compared to the same quarter last year. Yet, the positives were partly offset by lower utility earnings due to a customer refund recorded in the quarter.

Apart from being the largest provider of electricity in the state of Hawaii, the company also provides banking services to individual and commercial customers. Its banking subsidiary is one of the largest banks in Hawaii.  During the quarter, American Savings Bank delivered strong loan growth that helped in offsetting the impact of lower utility earnings. The bank was one of the top ranked lenders in the state for the quarter. Year-to-date loan growth was 9.1%, driven by higher yielding loans, including residential mortgages, coming in well above the average peer growth.

However, lower electricity volume sales, a tourism-dependant Hawaiian economy, lowered guidance and uncertainty over the Japanese economy raise our apprehensions.

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 issued by the Public Utilities Commission of the State of Hawaii.

Other Stocks to Consider

Hawaiian Electric presently retains a Zacks Rank #3 (Hold). Stocks worth considering in the energy space are Zacks Ranked #1 (Strong Buy) Huaneng Power International, Inc. (HNP - Snapshot Report), and Zacks Ranked #2 (Buy) stocks Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report) and IdaCorp, Inc. (IDA - Snapshot Report).

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