Hawaiian Electric Industries Inc.
) announced third-quarter 2012 operating earnings of 49 cents per
share, beating the Zacks Consensus Estimate of 42 cents. However,
this came below year-ago quarterly earnings of 50 cents per
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Total revenue of the company at the end of the reported quarter
was $867.7 million versus $886.4 million in the year-ago quarter,
reflecting a 2.1% decline. Reported results however came in
higher than the Zacks Consensus Estimate of $860 million.
Hawaiian Electric reported net income of $47.7 million versus
$48.4 million in the year-ago quarter.
Segment Net Income
: Segment net income rose to $38.4 million in the reported
quarter from $38.0 million in the year-ago quarter. Net income
was flattish year over year as recovery of costs for reliability
and clean energy investments were largely offset by higher
The regulatory approval for recovery of costs for reliability and
clean energy investments in Oahu became effective in July 2011.
Earlier in 2011, the utility's performance was affected by a
ramp-up of its clean energy and reliability initiatives. This put
pressure on first half 2011 earnings until the Oahu utility was
allowed to start the recovery of these costs in July 2011.
Operations and maintenance (O&M) expenses were approximately
7% higher in the third quarter of 2012 compared with the third
quarter of 2011 largely due to higher customer service expenses.
This was offset by lower plant overhaul expenses due to timing of
work within the year.
: Hawaiian Electric's Banking segment recorded a net income of
$14.2 million in the reported quarter, compared with a net income
of $15.5 million in the year-ago quarter. The decrease resulted
from higher non-interest expense, primarily driven by spending
for new products and projects aimed at longer-term growth, and
lower net interest income from declining yields on assets. These
were partially offset by higher gains on sale of new residential
mortgages. Residential mortgage production totaled $272 million
in the quarter compared with $123 million in the same quarter
last year, outperforming the overall Hawaii market growth.
Overall, the segment continued to deliver solid results in third
quarter 2012 with a return on average equity of 11.2% and a
return on average assets of 1.15%.
: The segment digested a quarterly net loss of $4.9 million in
the third quarter of 2012 compared with a loss of $5.0 million in
the third quarter of 2011.
Total cash and cash equivalents as of September 30, 2012, were
$168.5 million versus $270.3 million as of December 31, 2011.
Cash provided by operations in the first nine months of 2012
totaled $121.6 million versus cash generated from operations of
$101.1 million in the year-ago period. Long-term debt rose to
$1.4 billion compared with $1.3 billion at year-end 2011.
On November 7, 2012, the board of directors also declared a
quarterly cash dividend of 31 cents per share, payable on
December 12, 2012, to shareholders of record at the close of
business on November 19, 2012 (ex-dividend date is November 15,
2012). The dividend is equivalent to an annual rate of
$1.24 per share. Hawaiian Electric has paid dividends
continuously since 1901 with a yield hovering close to 4.8%.
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 driven by all round
stable results. The company continued to reinvest earnings into
its Hawaii-based businesses. In the first nine months of 2012,
its three utilities, Hawaiian Electric, Maui Electric and Hawaii
Electric Light Company, invested $188 million for developing the
electric grid incorporating significant amounts of renewable
energy facilities in the process.
Likewise, at its banking business, loans to customers, excluding
residential lending, increased over $100 million in the first
nine months of 2012, with a $15 million increase in clean energy
loans. Over $600 million of new residential mortgages were
originated during this period, more than double the amount for
the same period last year.
However, the present weak Hawaiian economy and uncertainty
regarding the sustainable strength of the Japanese economy
continue to weigh on the stock's valuation. Also management
expects an increase in O&M expenses in the fourth quarter of
2012 due to the timing of projects and expects full year O&M
expense to be 4% higher than 2011.
Thus, in the near term, the stock retains a short-term Zacks #4
Rank, which translates into a Sell rating. Over the long term, we
maintain our Neutral recommendation on the stock. This is in line
with its peers
CMS Energy Corporation
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