Headquartered in Honolulu, Hawaii, Hawaiian Electric Industries, Inc. (HE) is engaged in the electric utility, banking, and renewable/sustainable infrastructure investment businesses, operating in Hawaii. Its segments are Electric Utility, and Bank. Its Electric Utility segment provides essential electricity service to Hawaii. Its Bank segment offers an array of banking and other financial services to Hawaii consumers and businesses. The Bank segment has lending activities that include origination, purchase, and sale of loans, residential mortgage lending, construction and development lending, multifamily residential and commercial real estate lending, consumer lending, commercial lending, and loan origination fee and servicing income.
The electric utility sector is expected to benefit from rising demand for electricity as industries increase their production with the increasing demand for goods. In addition, the need for electricity is expected to increase because the National Weather Service predicts a hotter than average summer this year. According to the U.S. Energy Information Administration (EIA), total electricity consumption is expected to increase by 1.6% year-over-year in 2022 and 1% year-over-year in 2023.
Over the last three years, HE's dividend payout has grown at a 3.1% CAGR, while its four-year average dividend yield is 3.29%. Its current dividend payout translates to a 3.27% yield. HE's stock has gained 10.5% in price over the past six months and 3.1% year-to-date to close the last trading session at $42.80.
Here is what could influence the performance of HE in the upcoming months:
Robust Financials
HE's total revenues increased 22.1% year-over-year to $785.06 million for the first quarter, ended March 31, 2022. The company's net income increased 7.4% year-over-year to $69.64 million. Also, its EPS was $0.63, representing a 6.7% increase year-over-year. In addition, its electric utility revenue increased 25.4% year-over-year to $708.79 million.
Favorable Analyst Estimates
Analysts expect HE's EPS for its fiscal 2023 to increase 7% year-over-year to $2.29. Its revenue for fiscal 2022 is expected to increase 5.5% year-over-year to $3.01 billion. And it surpassed consensus EPS estimates in three of the trailing four quarters.
Discounted Valuation
In terms of forward EV/EBITDA, HE's 11.74x is 2.4% lower than the 12.03x industry average. Its 19.93x forward non-GAAP P/E is 2.4% lower than the 20.41x industry average. Also, the stock's 2.34x forward EV/S is 47.2% lower than the 4.43x industry average.
POWR Ratings Show Promise
HE has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. HE has a B grade for Stability, which is in sync with its 0.27 beta.
It has a B grade for Sentiment, which is consistent with analysts’ expectations that its EPS will grow 1.3% per annum over the next five years.
HE is ranked #2 of 66 stocks in the Utilities – Domestic industry. Click here to access HE's ratings for Growth, Value, Momentum, and Quality.
Bottom Line
Electricity demand is expected to increase due to increased customer additions and hotter than average temperatures around the country. Given HE's discounted valuation, robust financials, high dividend yield, and impressive revenue and earnings growth estimates, we think adding this stock to your portfolio now could be wise.
How Does Hawaiian Electric Industries, Inc. (HE) Stack Up Against its Peers?
HE has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Utilities – Domestic industry with a B (Buy) rating: Otter Tail Corporation (OTTR) and PPL Corporation (PPL).
HE shares were trading at $42.61 per share on Thursday afternoon, down $0.19 (-0.44%). Year-to-date, HE has gained 4.43%, versus a -12.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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