Hawaiian Electric Meets Expectations – Analyst Blog

Hawaiian Electric Industries Inc. (HE) announced its second-quarter 2010 operating earnings of 31 cents per share, at par with the Zacks Consensus Estimate of 31 cents per share. The results of the company were higher than the year-ago earnings of 17 cents per share.

 

 

Total revenue of the company at the end of the second quarter was $655.7 million versus $525.9 million in the year-ago quarter, reflecting a growth of 24.7%. Reported results came in higher than the Zacks Consensus Estimate of $598 million.

 

The year-over-year growth in total revenue was driven by a higher contribution from the Electric Utility segment. The revenue from Electric Utility increased 29.7% year over year to $584.1 million, constituting 89.1% of total revenue in the reported quarter versus 85.6% in the year-ago quarter.

 

In the reported quarter, the contribution to total revenue from the Banking segment declined to 10.9% versus 14.4% in the year-ago quarter.

 

Loss from the Other segment was $63 million in the reported quarter versus a loss of $15 million in the year-ago quarter.

 

 

The total expenses of Hawaiian Electric increased 20.6% year over year to $592 million versus $490.1 million in the year ago quarter. However, as a percentage of total revenue, total expenses during the quarter decreased 303 basis points year over year. The relative decline in expenses was mainly due to lower operating expenses in the Banking segment in the reported quarter.

 

Operating income of the company in the reported quarter was $63.6 million versus $35.1 million in the year-ago quarter, reflecting a growth of 81.5%.

 

Interest expenses increased 13.1% to $20.2 million in the reported quarter versus $17.9 million in the year-ago quarter.

 

The company reported a consolidated net income of $29.2 million compared with $15.5 million in the year-ago quarter, reflecting a growth of 88.9%.

 

 

Electric Utility: Segment net income increased to $17.6 million in the reported quarter compared with $15.5 million in the year-ago quarter. Income was boosted by rate relief and savings from fuel efficiency.

 

Banking: Hawaiian Electric’s Banking segment recorded a net income of $16.1 million in the reported quarter, compared with a net income of $4.0 million in the year-ago quarter. The increase resulted from lower provision for loan losses, lower non-interest expenses, and higher non-interest income. These positives were partially offset by lower net interest income mainly due to lower earning asset balances and lower yields on investments.

 

Other: Net loss from this segment was $4.5 million in the reported quarter compared with a net loss of $4.0 million in the year-ago quarter. The decline of $0.5 million was mainly due to higher general and administrative expenses and borrowing costs.

 

 

Total cash and cash equivalents as of June 30, 2010, were $278.3 million versus $265.9 million as of June 30, 2009.

 

Hawaiian Electric spent approximately $83.7 million on capital expenditure during the first six months of 2010, substantially down from $175.1 million in the comparable period a year ago.

 

 

Hawaiian Electric considering the improvement in the economy increased its guidance for kilowatt sales in 2010. The company now expects kilowatt sales to remain flat with 2009 from an earlier expectation of a 0.9% decline year over year.

 

Hawaiian Electric’s Banking segment is on track to meet its target of $140 million to $145 million of annualized non-interest expense by the end of 2010.

 

 

The growth in the reported quarter was primarily driven by the results from the Banking segment. The Banking segment performed well in the reported quarter due to lower credit costs and lower operating expenses.

 

However, the present weak Hawaiian economy and uncertainty over the sustainable strength of the Japanese economy continue to weigh on the stock’s valuation. Hence, we retain a short-term Zacks #4 Rank on the stock, which translates into a Sell rating. Over the long term, however, we maintain our Neutral rating on the stock.

 

Based in Honolulu, Hawaii, Hawaiian Electric, through its subsidiaries, primarily engages in electric utility and banking businesses primarily in the state of Hawaii.