Hawaiian Electric To Gain From Tourism & Systematic Capex

We have recently issued an updated research report on Hawaiian Electric Industries, Inc. (NYSE:HE) . The company reported third-quarter 2018 adjusted earnings of 60 cents per share, which missed the Zacks Consensus Estimate by 3.2%. However, the bottom line improved 9.1% from 55 cents in the year-ago period.

In the reported quarter, total revenues of $768.1 million outpaced the Zacks Consensus Estimate of $672 million by 14.2%. Moreover, the top line rose 14.1% from the prior-year quarter’s figure.

Incorporated in 1981, Honolulu-based Hawaiian Electric is a holding company with subsidiaries engaged in electric utility, banking and other businesses, operating primarily in the state of Hawaii.

Hawaiian Electric Industries, Inc. Price and Consensus

Hawaiian Electric Industries, Inc. Price and Consensus | Hawaiian Electric Industries, Inc. Quote

What’s Driving the Stock?

Hawaiian Electric continues making systematic investments in utility infrastructure development projects. In 2017, the company spent $400 million on modernization and improvement of Hawaii's electric grids. For 2018, the company plans to pump approximately $400 million into the utility and expects its rate base growth in the 6-7% range, net of bonus depreciation.

Also, increased air travel to Hawaii particularly from the Western U.S. coupled with Hawaii’s unemployment rate of 2.2% in September 2018, below the national level of 3.7%, should further boost electricity demand in the state and in turn, profits of Hawaiian Electric. Moreover, single-family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems. Such initiatives are likely to strengthen the company’s position in the expanding renewables market.

To this end, Hawaii’s tourism industry, which is a significant driver of the economy, ended with solid growth in visitor spending and arrivals during third-quarter 2018. Evidently, visitor arrivals grew 6.5% and expenditures rose 9.8% in the reported quarter from the year-ago period’s level. The company estimates the tourism industry outlook to remain positive, projecting to achieve yet another record-setting period in 2018 with 10 million visitors’ arrival anticipated by this year-end.

However, Hawaiian Electric depends heavily on third-party suppliers for fuel and purchased power. Fluctuations in oil price in the global market also might hamper stocks like Hawaiian Electric. Any rise in natural gas price without a spike in power price will affect the company’s ability to generate power.

Zacks Rank & Key Picks

Hawaiian Electric currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks from the Zacks Utility – Electric Power industry are as follows:

Ameren Corporation (NYSE:AEE) carries a Zacks Rank #2 (Buy). The stock has seen the Zacks Consensus Estimate for 2018 earnings per share move 3.1% north over the past 30 days to $3.35.

American Electric Power Company, Inc. (NYSE:AEP) has a Zacks Rank of 2. The stock has seen the consensus estimate for current-year earnings being revised 1% upward over the past 30 days to $3.96 per share.

IDACorp, Inc. (NYSE:IDA) is a Zacks #2 Ranked player. The stock has seen the consensus mark for 2018 bottom line per share being raised 2.1% over the past 30 days to $4.38.

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