CLPHY CLP Holdings Ltd (PK)

Hawaiian Electric Industries Inc. (HE) announced fourth-quarter 2011 operating earnings of 36 cents per share, in line with the Zacks Consensus Estimate and beating past the year-ago earnings of 26 cents per share.

Fiscal 2011 operating earnings came in at $1.44 per share, nominally below the Zacks Consensus Estimate of $1.45. However, this was above fiscal 2010 earnings of $1.21 per share.

Operating Statistics

Total revenue of the company at the end of the fourth quarter was $851.0 million versus $695.7 million in the year-ago quarter, reflecting growth of 22.3%. Reported results also came higher than the Zacks Consensus Estimate of $728 million. Hawaiian Electric’s reported net income of $34.2 million compared favorably with $24.7 million in the year-ago quarter, helped by higher Utility and Bank earnings.

Fiscal 2011 revenue was $3.2 billion versus the Zacks Consensus Estimate of $2.9 billion. Full year revenue also outdid the $2.7 billion generated a year ago.

Segment Net Income

Electric Utility: Segment net income rose to $25.8 million in the reported quarter compared with $18.9 million in the year-ago quarter. Income for the quarter was boosted mainly by additional revenues allowed for reliability and clean energy investments for Oahu and Hawaii Island utilities; and lower O&M expenses. These were partially offset by the write-down of a transmission project, non-recurring tax settlement items in 2010 and lower kilowatt-hour sales. Kilowatt-hour sales were down 1.7% and 2.8% for Hawaii Island and Maui County, respectively, in the fourth quarter of 2011, compared year over year. 

Banking: Hawaiian Electric’s Banking segment recorded a net income of $15.3 million in the reported quarter, compared with a net income of $13.3 million in the year-ago quarter. The increase resulted from lower provision for loan losses partially offset by higher non-interest expense.

Other: Loss from this segment was $7.1 million in the reported quarter compared with a net loss of $4.4 million in the year-ago quarter.

Financial Update

Total cash and cash equivalents as of December 31, 2011, were $270.3 million versus $330.7 million as of December 31, 2010. Cash generated from operations in 2011 totaled $250.4 million versus cash from operations of $340.7 million in the year-ago period. Long-term debt fell to $1.3 billion at fiscal 2011 end compared with $1.4 billion at fiscal 2010 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 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. In the near term we retain a short-term Zacks #4 Rank on the stock, which translates into a Sell rating.

Over the long term, however, we maintain our Neutral rating on the stock. This is in line with its peers like CMS Energy Corporation (CMS) and CLP Holdings Ltd. (CLPHY). 

 
CMS ENERGY (CMS): Free Stock Analysis Report
 
HAWAIIAN ELEC (HE): Free Stock Analysis Report
 
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