Hawaiian Electric Topline Beats - Analyst Blog

Hawaiian Electric Industries Inc. (HE) announced fourth-quarter 2010 operating earnings of 26 cents per share, missing both the Zacks Consensus Estimate and the year-ago earnings of 35 cents. The decline in earnings is attributed to weather-driven declines in utility sales.

Fiscal 2010 operating earnings came in at $1.21 per share, below the Zacks Consensus Estimate of $1.33. However, this was above fiscal 2009 earnings of $1.12 per share.

Operating Statistics

Total revenue of the company at the end of the fourth quarter was $695.7 million versus $619.6 million in the year-ago quarter, reflecting growth of 12.3%. Reported results also came higher than the Zacks Consensus Estimate of $580 million.

Hawaiian Electric's reported net income of $24.7 million compared with $13.7 million in the year-ago quarter, helped by higher Bank earnings, which were partially offset by lower Utility earnings.

Fiscal 2010 revenue was $2.7 billion versus the Zacks Consensus Estimate of $2.5 billion. Full-year revenue also outdid $2.3 billion generated a year ago.

Segment Net Income

Electric Utility:

Segment net income slipped to $18.9 million in the reported quarter compared with $23.3 million in the year-ago quarter. Income for the quarter was affected mainly by lower kilowatt hour sales, and higher operation and maintenance expenses.

These were partially offset by rate relief granted in Oahu and 2010 Maui rate cases and tax settlement items. Kilowatthour sales were down 2.1% in the fourth quarter of 2010, compared year over year, mostly due to cooler and less humid weather.

Banking:

Hawaiian Electric's Banking segment recorded a net income of $13.3 million in the reported quarter, compared with a net income of $14.9 million in the year-ago quarter. The decrease resulted from higher provision for loan losses; reduction in net interest income primarily due to lower yields and lower earning asset balances; and reduction in non-interest income due to lower fees as a result of regulatory changes.

Other:

Net loss from this segment was $7.5 million in the reported quarter compared with a net loss of $5.2 million in the year-ago quarter. The increase in losses was mainly due to the non-adjustment of a deferred tax asset.

Financial Update

Total cash and cash equivalents as of December 31, 2010, were $330.7 million versus $503.9 million as of December 31, 2009. Cash generated from operations in 2010 totaled $340.7 million versus cash from operations of $284.5 million in the year-ago period. Long-term debt remained at the same level of $1.4 billion at fiscal 2010 end compared to fiscal 2009 end.

Our View

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

Performance 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 regarding the sustainable strength of the Japanese economy continue to weigh on the stock's valuation. Hence, over the long term, however, we maintain our Neutral rating on the stock.

In the near-term we retain a short-term Zacks #2 Rank on the stock, which translates into a Buy rating. This is in line with its peers like CMS Energy Corporation (CMS) and CLP Holdings Ltd. (CLPHY).