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On Wednesday, Jefferies analyst Julian Dumoulin-Smith adjusted the price target for Hawaiian Electric (NYSE:HE) to $11.25, up from the previous $11.00, while maintaining a Hold rating on the stock. The adjustment follows legislative developments in Hawaii that are expected to impact the company’s financial outlook. According to InvestingPro data, the stock currently trades at $10.9, with analysts’ targets ranging from $10 to $14. While the company isn’t currently profitable, analysts forecast earnings of $0.74 per share for fiscal year 2025.
The analyst noted that the passage of SB 897, SB 1501, and HB 1001 by Hawaii’s legislature represents a major step forward for Hawaiian Electric since the Maui wildfires in 2023. These bills, anticipated to be signed by the governor in July, are aimed at addressing wildfire-related issues, which have been a significant concern for the utility company. InvestingPro analysis reveals the company maintains a solid current ratio of 1.25, indicating sufficient liquid assets to meet short-term obligations - crucial for managing potential wildfire-related liabilities. For deeper insights into Hawaiian Electric’s financial health and risk metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Dumoulin-Smith highlighted that the exact cap on wildfire-related liabilities remains undetermined, with an assumption of a $650 million cap being made for analytical purposes. The Public Utilities Commission (PUC) has yet to report back to the legislature on the potential pursuit of a wildfire fund, which adds to the uncertainty.
Despite these unknowns, the analyst believes that Hawaiian Electric’s wildfire risk has decreased compared to a scenario with no legislative action. This is reflected in the maintained 11% wildfire discount applied to the company’s valuation, which is compared to other utilities such as Xcel Energy (NASDAQ:XEL) at 7% and Portland General Electric (NYSE:POR) at 15%. Additionally, a further 15% discount is applied to Hawaiian Electric’s operating utility, aligning it with peers like Avista Corporation (NYSE:AVA) in Washington.
The analyst expressed a cautiously optimistic view on Hawaiian Electric’s shares, citing the pending wildfire legislation that establishes a liability cap and securitization as positive steps towards credit recovery and earnings normalization for the company. However, the presence of critical unanswered questions continues to be a drag on the stock, causing it to trade at approximately 39% below its utility peers based on 2027 estimated price-to-earnings ratios.
In summary, while the analyst sees potential for a positive return profile for Hawaiian Electric, they anticipate that it will take time for these benefits to materialize. As a result, the Hold rating is maintained as the company navigates through the legislative changes and their implications for the future. InvestingPro data shows the company’s overall Financial Health Score is currently rated as WEAK, with additional ProTips available to subscribers that could help inform investment decisions during this transitional period.
In other recent news, Hawaiian Electric Industries Inc . reported its first-quarter 2025 earnings, showing a slight beat in earnings per share (EPS) at $0.23, surpassing the expected $0.2277. The company’s core utility net income improved to $49.7 million, up from $44.2 million in the same quarter of the previous year, reflecting operational efficiency. Additionally, the holding company’s core net loss was reduced to $9.9 million from $15.8 million in Q1 2024. Evercore ISI reiterated its Outperform rating for Hawaiian Electric, maintaining a $14.00 price target, citing the company’s steps to improve financial stability after the 2023 Maui wildfires. Hawaiian Electric has bolstered its liquidity through increased cash reserves and new financial mechanisms, such as an at-the-market program and a utilities accounts receivable facility. The company also received legislative approval for securitization to fund future wildfire mitigation investments. Legislative support in Hawaii is expected to benefit utility operations, though ongoing impacts from the 2023 wildfires continue to pose challenges. The company is preparing for a rate case filing in late 2025, focusing on financing strategies for settlement payments related to the wildfires.
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