Hawaiian Electric Industries Inc. (HE) announced third-quarter 2010 operating earnings of 35 cents per share, missing both the Zacks Consensus Estimate and the year-ago earnings by 2 cents. The decline in earnings is attributed to weather-driven declines in utility sales.
Total Revenue
Total revenue of the company at the end of the third quarter was $694.5 million versus $620.3 million in the year-ago quarter, reflecting growth of 12%. Reported results also came in marginally higher than the Zacks Consensus Estimate of $690 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 13.6% year over year to $623.1 million, constituting 89.7% of total revenue in the reported quarter versus 88.4% in the year-ago quarter.
In the reported quarter, the contribution to total revenue from the Banking segment declined to 10.3% versus 11.6% in the year-ago quarter.
Loss from the Other segment was $14 million in the reported quarter versus a loss of $74 million in the year-ago quarter.
Operational Update
Hawaiian Electric’s total expenses increased 12.7% year over year to $621.9 million in the third quarter. The increase was of almost 60 basis points, as a percentage of total revenue, over the last year. The rise in expenses was mainly due to higher operating expenses at the Utility segment, offset by lower operating expenses in the Banking segment.
Despite the rise in operating costs, the company’s operating income in the reported quarter was $72.6 million versus $68.6 million in the year-ago quarter, reflecting a growth of 5.8%.
Hawaiian Electric’s reported net income in the quarter dipped 3.3% year over year to $32.4 million compared with $33.5 million in the year-ago quarter, helped by higher Bank earnings, which were more than offset by lower Utility earnings.
Segment Net Income
Electric Utility: Segment net income slipped to $22.0 million in the reported quarter compared with $26.5 million in the year-ago quarter. Income for the quarter was affected mainly by lower kilowatt hour sales, higher operation and maintenance expenses, higher financing costs and depreciation.
Banking: Hawaiian Electric’s Banking segment recorded a net income of $15.3 million in the reported quarter, compared with a net income of $11.3 million in the year-ago quarter. The increase resulted from higher non-interest income and lower non-interest expenses. These positives were partially offset by a higher provision for loan losses and lower net interest income primarily due to lower earning asset balances.
Other: Net loss from this segment was $4.8 million in the reported quarter compared with a net loss of $4.4 million in the year-ago quarter. The increase in losses was mainly due to higher borrowing costs.
Financial Update
Total cash and cash equivalents as of September 30, 2010, were $287.5 million versus $503.9 million as of December 31, 2009.
Hawaiian Electric’s capital expenditure of approximately $137.6 million during the first nine months of 2010 substantially dropped from $239.4 million in the comparable period a year ago.
Dividend
The board of directors of Hawaiian Electric announced a regular quarterly cash dividend of 31 cents per share. The dividend is payable on December 10, 2010, to shareholders of record as on November 15, 2010. The dividend is equivalent to an annual rate of $1.24 per share.
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