On Monday (NASDAQ:MNDY), Evercore ISI, a prominent investment firm, increased the price target for Hawaiian Electric (NYSE: HE) to $11.00, up from the previous $9.00, while maintaining an In Line rating for the stock. The adjustment follows Hawaiian Electric's resolution of its going concern risk, which has relieved the company of immediate financing pressures.
Hawaiian Electric had initially faced a significant financial hurdle due to a $1.7 billion settlement charge recognized in the second quarter of 2024. This charge was classified as a short-term liability, necessitating the company to secure financing before March 3, 2025, to avoid defaulting when filing its annual financial statements for 2024. However, with the third quarter 2024 results, the company restructured its liability, planning to pay the settlement in four equal annual installments. The revised total settlement accrual now stands at $1.92 billion.
The company's recent common stock offering and other liquidity measures have provided enough cash to cover the first installment of the settlement. Management has confirmed that the steps taken have mitigated the concerns about the company's ability to continue as a going concern. Hawaiian Electric's strategic review of its Pacific Current subsidiary is underway. Pacific Current comprises several unregulated projects with consistent cash flows, including various facilities ranging from solar to biomass and storage.
The Hawaii Public Utilities Commission had previously rejected Hawaiian Electric's proposal to purchase the Hamakua facility, a significant asset of Pacific Current, for $86 million in May 2017. Despite this, the company acquired the asset in September 2017 under the Pacific Current subsidiary for an undisclosed sum. On the fourth quarter 2017 earnings call, Hawaiian Electric projected that the Hamakua asset would contribute approximately $3-4 million to their earnings per share (EPS).
Evercore ISI estimates that Hawaiian Electric could realize $50-100 million from Pacific Current, considering potential earnings growth from new assets, despite accounting for any impairments. This valuation is based on a 15.0x 2026 EPS multiple. The strategic review of Pacific Current and the company's ability to address its financial obligations are key factors noted by the investment firm in its assessment of Hawaiian Electric's stock.
In other recent news, Hawaiian Electric has seen some significant developments. The company has successfully raised approximately $558 million from a stock offering, which will contribute towards a potential settlement in the Maui wildfire litigation and for general corporate purposes. Additionally, the company has announced a $500 million common stock offering, with options for underwriters to purchase $75 million more.
Evercore ISI has adjusted the price target for Hawaiian Electric, increasing it to $11.00 from $9.00, following the company's resolution of a significant financial risk. Hawaiian Electric had faced potential default due to a $1.7 billion settlement charge, but with recent developments, the risk of going concern has been significantly reduced.
Furthermore, the company has agreed to pay approximately $1.99 billion as part of a legal settlement related to the Maui wildfires, with payments expected to commence from mid-2025. This follows a second-quarter net loss of $1.30 billion, largely due to a wildfire-related charge of $1.71 billion.
Hawaiian Electric is also conducting a strategic review of its subsidiary, Pacific Current, which could potentially realize $50-100 million for the company.
InvestingPro Insights
Recent InvestingPro data provides additional context to Hawaiian Electric's financial situation. The company's market capitalization stands at $1.75 billion, with a price-to-book ratio of 1.11 as of the last twelve months ending Q3 2024. This valuation metric aligns with Evercore ISI's updated price target and reflects the market's current assessment of the company's assets relative to its stock price.
InvestingPro Tips highlight that Hawaiian Electric has maintained dividend payments for 53 consecutive years, demonstrating a long-term commitment to shareholder returns. However, it's important to note that the company was not profitable over the last twelve months, with a negative gross profit margin of -82.54% and an operating income margin of -93.0% for the same period.
These financial metrics underscore the challenges Hawaiian Electric faces, as discussed in the article regarding the settlement charges and financing pressures. The company's ability to navigate these difficulties while maintaining its dividend history will be crucial for investor confidence.
For readers seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Hawaiian Electric's financial health and future prospects.
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