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Should You Get Rid of Hawaiian Electric Industries (HE) Now?


A provider of electricity in the state of Hawaii, Hawaiian Electric Industries, Inc. HE relies heavily on fuel oil supply. As a result, fluctuations in the oil price in the global market tend to affect stocks like Hawaiian Electric.

Evidently, higher fuel oil price led to 13.7% increase in the company’s third-quarter 2017 fuel oil price expense, which in turn elevated total expenses by 6.1% year over year. Going ahead, if such hikes in fuel oil price continue, rising expenses may drag down the operating profit rate for the company.

Coming to its earnings performance, Hawaiian Electric reported adjusted earnings per share (EPS) of 55 cents in third-quarter 2017, which missed the Zacks Consensus Estimate by 3.5%. The company’s earnings also fell 5.2% from the year-ago number of 58 cents.

Moreover, the company’s Zacks Consensus Estimate for 2017 earnings, which is pegged at $1.63 per share, came down by a couple of cents, in past 60 days.

Notably, the company's Electric segment utilizes natural gas as a key fuel for power production. Consequently, rise in price of natural gas without a proportional hike in power prices may hamper the company's earnings and in turn the performance.

Going ahead, the company expects to generate EPS in the lower end of the range of $1.17-$1.27 in its Electric Utility segment.

Further, increasingly stringent government regulations on emission control remains a cause of concern for Hawaiian Electric, despite the company's focus on renewable assets and systematic investments in transmission and distribution projects, This is due to the fact that these regulations require additional investments in low-emission systems installations.

In fact, during the third quarter, the company incurred an additional depreciation cost of $1 million, as a result of renewable energy integration and customer reliability.

Hawaiian Electric Industries, Inc. Price and Consensus

Zacks Rank & Key Picks

Hawaiian Electric (HE) currently carries a Zacks Rank #4 (Sell). Investors can consider some better-ranked stocks from the same industry such as PNM Resources, Inc. (Holding Co.) PNM, IDACORP, Inc. IDA and UNITIL Corporation UTL, all of which carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PNM Resourcesposted positive earnings surprise of 9.41% in third quarter of 2017. Additionally, its current year estimates have increased to $1.86 per share from $1.85 per share in the last 60 days.

IDACORP posted positive earnings surprise of 8.43% in third quarter of 2017. Additionally, its current year estimates have increased to $4.08 per share from $4.00 per share in the last 60 days.

UNITIL Corporation reported positive earnings surprise of 45.45% in the third quarter of 2017. Its current year estimates have increased to $2.03 per share from $1.98 per share in the last 60 days.

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