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Hawaiian Electric Earnings a Penny Ahead

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Hawaiian Electric Industries Inc. (HE - Free Report) posted third quarter 2013 earnings of 48 cents per share, beating the Zacks Consensus Estimate by a penny. However, earnings declined 2.0% year over year.

The results reflect higher bank earnings that helped to offset lower utility earnings. The year-over-year decline was mostly due to a higher share count resulting from the issuance of shares through a dividend reinvestment program. This program was aimed to support the capital needs of Hawaiian Electric, Hawaii Electric Light and Maui Electric Company.

Operating Statistics

Total revenue at the end of the reported quarter was $831.2 million, down 4.2% year over year. Reported results were also below the Zacks Consensus Estimate of $865.0 million. The downside reflects lower electric utility sales.

Total expenses were down 4.5% year over year to $741.1 million. Total operating income was $90.1 million, down 1.7% year over year.

Segment Net Income

Electric Utility: Segment net income declined 1.6% year over year to $37.8 million. The results reflect higher depreciation expense and higher operations and maintenance expense. However, these negatives were partially offset by lower substation and generating station maintenance expenses and higher net revenues.

Banking: Hawaiian Electric’s Banking segment recorded net income of $15.3 million in the reported quarter, up 7.7% from $14.2 million in the year-ago quarter. The year-over-year increase was driven by a lower provision for loan losses, a net gain on the sale of the credit card portfolio and higher fee income on other financial products. These positives were offset by lower mortgage banking income and lower fees from other financial services due to lower interchange fees.

Other: The segment digested a quarterly net loss of $4.9 million, flat year over year.

Financial Update

Cash and cash equivalents as of Sep 30, 2013, were $215.0 million, down from $219.7 million as of Dec 31, 2012. Long-term debt, net other than bank was $1,422.9 million, approximately flat year over year.


The company narrowed its GAAP earnings per share guidance to $1.55 to $1.62 from its prior expectation of $1.52 to $1.62.

Peer Reviews

Exelon Corporation (EXC - Free Report) announced third-quarter 2013 pro-forma earnings of 78 cents per share, surpassing the Zacks Consensus Estimate by 12 cents. Quarterly earnings edged up 1.3% year over year.

Edison International’s (EIX - Free Report) adjusted earnings of $1.42 per share for the third quarter of 2013 were well ahead of the Zacks Consensus Estimate of $1.21 by 17.4% and the year-ago quarterly earnings of $1.00 by 42.0%. The upside was driven by robust cost management initiatives along with favorable tax benefits.

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. 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%. The company is also engaged in issuance of shares for its capital needs.

The company presently has a short-term Zacks Rank #3 (Hold). In the near term, we would advise investors to accumulate its short-term Zacks Rank #1 (Buy) peer NRG Yield Inc. (NYLD - Free Report) .

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