Evercore ISI raises Hawaiian Electric stock rating to Outperform

On Friday, Evercore ISI upgraded Hawaiian Electric (NYSE:HE) stock rating from In Line to Outperform, with a new price target of $14.00, increased from the previous $12.00. The upgrade follows the firm’s assessment that the company is now better positioned than before relative to its peers. According to InvestingPro data, the stock currently trades at $10.40, with analyst targets ranging from $9.00 to $12.50.

Stifel analysts pointed out that Hawaiian Electric’s shares are currently trading at a 45% discount on forward-year earnings per share (EPS). This valuation is similar to July 2024, when it was reported that a tentative settlement had been reached, which could potentially unravel. However, the situation has since evolved favorably for Hawaiian Electric. InvestingPro analysis suggests the stock is currently undervalued, with analysts forecasting a return to profitability this year with an EPS of $1.01.

The upgrade is attributed to several factors that have bolstered the company’s standing. Firstly, there is now a definitive settlement agreement in place, which offers clarity and a path toward finalization. Secondly, Hawaiian Electric has improved its balance sheet, partly due to the proceeds from the sale of American Savings Bank, which were used for debt reduction.

Additionally, Hawaiian Electric is noted to have strong access to capital markets and significantly higher liquidity. This liquidity is supported by cash on hand, an undrawn at-the-market (ATM) program, an accounts receivable facility approved for long-term use, and block equity funds set aside for the first settlement payment.

Lastly, the company may benefit from potential legislative support, which could further solidify its position. The cumulative effect of these developments has led to a more optimistic outlook on Hawaiian Electric’s stock by Evercore ISI.

In other recent news, Hawaiian Electric Industries reported significant financial challenges in Q4 2024, primarily due to wildfire-related expenses. The company faced a full-year loss from continuing operations of $1.3 billion, largely driven by $1.9 billion in pre-tax wildfire settlement accruals. Despite these setbacks, Hawaiian Electric achieved a 36% renewable portfolio standard and sold 90.1% of American Savings Bank for $450 million, marking a strategic shift towards simplifying its business model. Analysts at Evercore ISI maintained an "In Line" rating for the company and raised the price target to $12.00, citing a favorable Hawaii Supreme Court ruling that could reduce legal uncertainties. Jefferies analyst Julian Dumoulin-Smith maintained a Hold rating with a $10.00 price target, noting the company’s proactive approach to securing wildfire legislation and the positive legislative support. Legislative developments in Hawaii include two bills, SB897 and HB982, focusing on establishing a wildfire insurance fund and setting liability limitations, which could have implications for Hawaiian Electric’s operations. Investors and stakeholders will be closely monitoring the progress of these legislative measures, as their passage could significantly impact the company’s financial responsibilities and risk management strategies.

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