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On Monday, Evercore ISI reiterated its Outperform rating and $14.00 price target for Hawaiian Electric (NYSE:HE), representing a significant upside from the current stock price of $10.49. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics. Following a challenging period after the August 2023 wildfire, which prompted credit rating downgrades, the company has taken several steps to improve its financial stability and creditworthiness, maintaining a moderate debt level with a debt-to-equity ratio of 2.27. Hawaiian Electric reached a manageable wildfire settlement, which is nearing finalization supported by a favorable Hawaii Supreme Court decision. The company also divested American Savings Bank and retired significant debt at the holding company level.
Hawaiian Electric’s liquidity has been bolstered by increased cash reserves and the establishment of new financial mechanisms, including an at-the-market (ATM) program and a utilities accounts receivable facility. With an EBITDA of $504.51 million in the last twelve months and a market capitalization of $1.81 billion, the firm’s fixed-charge coverage ratio, as indicated by funds from operations (FFO) to debt, remains strong and is considered to be at investment-grade levels. InvestingPro data reveals additional insights about the company’s financial health, with comprehensive analysis available in the Pro Research Report, part of the extensive coverage of over 1,400 US stocks.
The company has demonstrated its ability to access capital markets through a block equity issuance in September 2024, with the proceeds earmarked for the first settlement payment. Investments in wildfire mitigation and the creation of a Public Safety Power shutoff program have also reduced physical risks. Additionally, Hawaiian Electric has received legislative approval for securitization to fund future wildfire mitigation and resilience investments, as well as for the state’s contribution to the settlement fund.
There remains some uncertainty regarding how the Public Utilities Commission (PUC) will address wildfire limitations of liability and recommendations for a potential insurance fund, expected to be made by the 2026 legislative session. Despite this, the analyst at Evercore ISI believes that Hawaiian Electric is well-positioned for potential positive outlook revisions from credit agencies, which could lead to rating upgrades, possibly by multiple notches, once the settlement is finalized. InvestingPro currently assigns the company a FAIR Financial Health Score, with detailed metrics and additional ProTips available to subscribers.
In other recent news, Hawaiian Electric Industries Inc . reported its first-quarter 2025 earnings, revealing a slight beat in earnings per share (EPS). The company posted an EPS of $0.23, narrowly surpassing the forecast of $0.2277. The core utility net income increased to $49.7 million from $44.2 million in the same quarter of the previous year, while the holding company reduced its core net loss to $9.9 million from $15.8 million. Despite ongoing challenges from the 2023 Maui wildfires, Hawaiian Electric is focusing on legislative support and operational efficiencies to stabilize its financial performance. The company has also been actively working on resolving wildfire-related legal issues and has made significant strides in securing settlements. Legislative measures in Hawaii are anticipated to support utility operations, including a potential liability cap on wildfire damages. Looking ahead, Hawaiian Electric plans to concentrate on regulated utility operations and significant investments in renewable energy and grid enhancements. The company is preparing for a rate case filing in late 2025, with an emphasis on financing strategies for settlement payments related to the Maui wildfires.
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