Ever since the evolution of electricity, demand for electric power has been been rising exponentially. To satisfy America's need for the ever growing demand of power; various companies are looking to generate more power by use of conventional and non conventional methods. Hawaiian Electric Industries (HE, Financial) is one such company in the U.S. that supplies 95% of electricity in Hawaii with its customer base of over 450,000.
Hawaiian Electric Industries not only has various subsidiaries for power generations but also operates a financial institute that funds projects through American Saving Bank. The various subsidiaries of HE are Maui Electric Company, HECO and Hawaii Electric Light Company providing utility services.
The company recently declared Q2 2014 results that were not alarming on revenue grounds, but earnings did beat the consensus estimates and also in line with the management estimates.
Financials
Total net revenue recorded in Q4 2013 was $798.6 million, a marginal increase by 0.5% year ago quarter ($790 million). The reported revenue also was ahead of the consensus estimates of $796 million. Despite not much growth in revenue, income showed a growth of 2.6% to a record $82.3 million. EPS of $0.41 for the current quarter did beat the consensus estimate by over 5%.
Utility services contributed net income of $34.2 million, growth of over $19% year over year. The banking division posted net income of $11.7 million, a decline by $4.2 million (26%) from last year. As we analyze the bottom line, we observe that Hawaiian Electric Industries Utility division contributed to the growth in earnings to offset lower earnings from the Banking. The low interest rates and slowdown in mortgage market was the main cause of a slight decline in earnings for banking segment.
Journey ahead
Hawaiian Electric Industries is mainly focused on lowering the high oil bill for customers. It is also investing in infrastructure to ensure stable services to its customers. With Enhanced infrastructure facility, it will always provide high-end support to its customers, and this in turn will benefit the future growth of the company. Its policy for acquiring and integrating local renewal energy allows it to offer lower prices as compared to oil-based energy. So the company is making some decent moves for sustained growth in the future.
The company has also restored a 20 MW wind power and is now operating in full capacity. In 2012 this plant was suspended from all operation due to batteries catching fire and creating a hazardous working environment. With the new innovative technology the wind farm is now successfully operating. This will also benefit the company in the upcoming quarters and a brighter future.
Competitors
American Electric Power (AEP, Financial) is also a power generation company with over 5 million customers in 11 different states of the U.S.
The company benefited from unbeaten rigid proceedings in several jurisdictions. It also benefited from the investment that it had made on transmission which resulted in earnings growth in each quarter of the year 2013 with transmission nearly doubling its earnings contribution in 2013,
Looking ahead, the company has entered into a joint venture program for its global power projects in various countries like Chile and Vietnam. The company also efficiently uses its asset management to invest in a newer market this policy also helps the company to keep the operational overhead cost under control.
Conclusion
Hawaiian Electric Industries is a stable stock. Its 52-week band is very narrow, in the range of $22-$27. It also offers a luscious dividend of 4.5%. This can also be a reason why investors looking for dividend-paying companies can always consider this stock. The company has been divesting non-core assets and focusing on other growing regions. Company is also optimist about its long term earning growth prospective and anticipates earning growth strategy in the range of 4%-6% primarily driven with transmission growth and strategic investment in utility infrastructure and cost controls.
