Jefferies raises Hawaiian Electric target to $11.00, keeps Hold

On Monday, Jefferies analyst Julian Dumoulin-Smith updated the firm’s stance on Hawaiian Electric (NYSE:HE), increasing the price target to $11.00 from the previous $10.75 while retaining a Hold rating on the stock. Currently trading at $10.05 with a market capitalization of $1.73 billion, the company’s shares have shown strong returns over the last three months according to InvestingPro data. The adjustment comes amid anticipations of legislative developments that could impact the utility company’s financial outlook.

Dumoulin-Smith noted a cautious approach towards Hawaiian Electric’s shares due to the potential limited upside from the current legislative view. While InvestingPro data shows the company maintains healthy liquidity with a current ratio of 1.61, its overall Financial Health Score remains WEAK at 1.73. The analyst is closely monitoring the reconciliation process of the Hawaii legislature, which may lead to significant share price volatility leading up to the session expiration on May 2nd. The reconciliation concerns the differences between the House and Senate versions of the wildfire fund legislation, which at present, remains unclear.

Hawaiian Electric’s stock continues to trade at a substantial discount, approximately 40% lower than its industry peers, who on average are trading at an 8% discount. The company’s valuation metrics from InvestingPro show a Price-to-Book ratio of 1.13 and an EV/EBITDA multiple of 8.6x. While this discount may seem attractive at first glance, the analyst pointed out several factors that justify the lower valuation. These include an earnings per share reset, a lack of growth, and the absence of securitization.

The analyst further compared Hawaiian Electric’s situation to that of other wildfire-exposed utilities such as PCG and EIX, which also trade at similar discounts of around 40% and 45% respectively. These companies are considered to remain at risk due to both physical and legislative factors as wildfire concerns regain attention.

In conclusion, Dumoulin-Smith stated that Jefferies will maintain its Hold rating on Hawaiian Electric shares until the outcomes of the legislative process become clear, which could potentially alter the risk profile of the company. For deeper insights into Hawaiian Electric’s financial health, valuation metrics, and exclusive ProTips, investors can access the comprehensive Pro Research Report available on InvestingPro, which provides detailed analysis of this and 1,400+ other US stocks.

In other recent news, Hawaiian Electric Industries Inc . (HEI) has been making headlines with several key developments. S&P Global Ratings upgraded the company’s outlook to positive, following a favorable Hawaii Supreme Court decision and the sale of a 90.1% stake in American Savings Bank, which generated approximately $384 million in net proceeds. These funds are intended to repay holding company debt, improving HEI’s liquidity position. Evercore ISI also upgraded Hawaiian Electric’s stock rating from In Line to Outperform, citing an improved balance sheet and a definitive settlement agreement that clarifies the company’s financial obligations.

Additionally, Jefferies maintained a Hold rating on Hawaiian Electric, recognizing the company’s proactive legislative efforts to mitigate wildfire risks. Evercore ISI analyst Durgesh Chopra raised the stock’s price target to $12.00, reflecting positive legal developments and the potential impact of upcoming legislative measures. These legislative developments, including two significant bills, could establish a wildfire insurance fund and set liability limitations, which are crucial for Hawaiian Electric’s operations and financial responsibilities.

Hawaiian Electric’s recent actions, such as improving access to capital markets and maintaining strong liquidity, have contributed to a more optimistic outlook among analysts. The company’s ongoing engagement with legislators and the favorable court ruling are seen as steps towards stabilizing its financial standing and reducing legal uncertainties. As the legislative process unfolds, investors will be closely monitoring the implications for Hawaiian Electric’s future operations and risk management strategies.

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