Hawaiian Electric Industries Inc.
) posted second quarter 2013 earnings of 41 cents per share,
beating the Zacks Consensus Estimate of 38 cents. Also, earnings
came in ahead of the year-ago figure by a penny.
The results reflect higher bank earnings compared to the same
quarter last year. The positives were partly offset by lower
utility earnings due to a customer refund recorded in the
Total revenue at the end of the reported quarter was $796.7
million, down 6.7% year over year. Reported results were also
below the Zacks Consensus Estimate of $830.0 million.
Segment Net Income
Segment net income declined 2.4% year over year to $28.7 million.
The results reflect higher depreciation expense, higher customer
service costs and relatively flat revenue owing to the customer
refund granted in its recent final rate case decision. However,
these were partially offset by lower operations and maintenance
(O&M) expenses because of the temporary delays in overhauls
and reversals of previously expensed costs.
Hawaiian Electric's Banking segment recorded net income of $15.9
million in the reported quarter, up 12.2% from $14.2 million in
the year-ago quarter. The increase reflects a lower provision for
loan losses of $2 million, $1 million of which related to the
strategic third quarter sale of American's credit card portfolio,
and $1 million higher gains on sales of investment securities.
However, these were partially offset by lower mortgage banking
income and higher non-interest expense.
Overall, the segment continued to deliver solid results in second
quarter 2013 with a return on average equity of 12.6% and a
return on average assets of 1.25%.
The segment digested a quarterly net loss of $4.0 million,
narrower than the year-ago loss of $4.8 million.
Cash and cash equivalents as of Jun 30, 2013, were $153.7
million, down from $219.7 million as of Dec 31, 2012. Long-term
debt, net was $1,422.9 million, approximately flat year over
year. Net cash provided by (used in) operating activities was
$130.8 million in the first half of 2013 versus ($3.6) million in
the year-earlier period.
Recently, Hawaiian Electric lowered its earnings guidance for
2013. The lowered guidance reflects Maui Electric Company,
Limited's (MECO) 2012 test year final rate case decision and
order (D&O) issued by the Public Utilities Commission of the
State of Hawaii ("PUC").
The company expects adjusted earnings per share in the range of
$1.54 to $1.64 and GAAP earnings in the range of $1.52 to $1.62
per share. The guidance reflects $7.8 million lower MECO annual
revenues as a result of the final D&O. With its first quarter
results, the company had issued 2013 earnings guidance in the
range of $1.58 to $1.68 per share.
For Hawaiian Electric Company, Inc., the company expects adjusted
earnings per share in the range of $1.19 to $1.25 and GAAP
earnings per share in the range of $1.17 to $1.23.
The company presently retains a short-term Zacks Rank #3 (Hold).
Going forward, we expect the company to benefit from investment
in local infrastructure. The company made $140 million of
infrastructure investments in the first half of 2013. Also, its
common stock offering would bring in capital, and a more modern
electric grid and lower-cost renewable energy would benefit
customers. The company is trying to reduce its dependence on oil
and is constantly seeking ways to increase the use of lower-cost
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%.
We are nevertheless concerned about lower electricity volume
sales, a tourism-dependant Hawaiian economy and the volatile
Stocks that are well placed in the energy space are Zacks Ranked
#1 (Strong Buy)
Huaneng Power International, Inc.
UNS Energy Corp.
), and Zacks Ranked #2 (Buy)
Alliant Energy Corp.
HAWAIIAN ELEC (HE): Free Stock Analysis
HUANENG POWER (HNP): Free Stock Analysis
ALLIANT ENGY CP (LNT): Free Stock Analysis
UNS ENERGY CORP (UNS): Free Stock Analysis
To read this article on Zacks.com click here.