Hawaiian Electric Industries Inc. (HE) reported financial results for its fourth quarter of 2009. Earnings per share came in at 15 cents, compared to the Zacks Consensus Estimate of 20 cents and the year-earlier earnings of 16 cents. For fiscal 2009, the company reported EPS of 91 cents, lagging behind both the Zacks Consensus Estimate of 97 cents and the 2008 figure of $1.07. 

Estimate Revisions Trend
 
Out of 4 analysts covering the stock, one has lowered expectation for fiscal 2010 in the last 30 days. Hawaiian Electric’s fiscal 2010 EPS as per the Zacks Consensus Estimate is presently $1.51. The contraction in earnings is in line with historical earnings surprises. In the past, the stock has fluctuated substantially over the last four quarters, with the average remaining at negative 19.98%. 

We currently have a market Neutral recommendation on Hawaiian Electric. Given the company’s electric business and unique banking operations, the case for a market-Neutral rating is supported by a high dividend yield and the near-monopoly status within the utility and banking industries. 

The positives are offset by existing risks associated with the outcome of regulatory disputes, a weakening Hawaiian economy due to the global recession and volatile financial market, and uncertainties prevailing over the sustainable strength of the Japanese economy. 

Operational Performance
 
Hawaiian Electric recorded revenues of $619.6 million in the reported quarter compared to $799.8 million in the year-ago quarter. In fiscal 2009, the company clocked revenues of $2.3 billion compared to $3.2 billion in fiscal 2008. 

Performance in fiscal 2009 was affected by lower kilowatt-hour sales and increases in utility operation and maintenance and bank credit expenses, partially offset by higher rates. 

Electric Utility: Hawaiian Electric’s Electric Utility segment net income increased to $23.3 million in the reported quarter compared to $14 million in the year-ago quarter. Income was boosted by interim rate relief, higher kilowatt-hour sales and cost control efforts. On the revenue front, the company registered revenue of $574.5 million compared to $720.6 million in the year-ago quarter. 

Banking: Hawaiian Electric’s Banking segment recorded a net loss of $4.5 million in the reported quarter, compared to a net income of $5.9 million in the year-ago quarter. Reported quarterly performance was affected by after-tax losses of $19.3 million related to the liquidation of the private-issue mortgage-related securities (PMRS) portfolio. Excluding the $19.3 million after-tax charge from the PMRS liquidation, adjusted quarterly earnings were $14.9 million. Quarterly revenue fell to $53.8 million compared to $69.2 million in the year-ago quarter. 

Other: Hawaiian Electric’s Other segment suffered a net loss of $5.2 million in the reported quarter, compared with $6.1 million in the year-ago quarter. This was due to lower general and administrative expenses and lower borrowing costs. 

Financial Condition 

Hawaiian Electric ended fiscal 2009 with cash and cash equivalents of $502.4 million compared to $182.9 million as of year-end 2008. The company generated $284.5 million of cash flow from operating activities in fiscal 2009, compared to $259.8 million generated in fiscal 2008. Long-term debt increased to $1.4 billion at the end of fiscal 2009 from $1.2 billion at the end of fiscal 2008.
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