Hawaiian Electric drops after pulling guidance, delaying quarterly filing

Shares of Hawaiian Electric (HE) plunged on Friday after the company delayed its quarterly SEC filing and pulled its guidance after the Maui wildfires. Wells Fargo downgraded the stock, saying that there is still risk of a $0 equity value should the company be held liable. 

THIRD QUARTER RESULTS: On Thursday, Hawaiian Electric reported third quarter adjusted core earnings per share of 56c, exceeding the 54c consensus estimate, while revenue of $794.99M missed the $858.36M consensus. “Our hearts are with the people of Maui, and we remain committed to supporting the recovery and rebuild effort. We have a long road ahead as we work towards recovery and restoration, and we can only be successful by working closely together as a community,” said Scott Seu, HEI president and chief executive officer, in a statement. The CEO added that “Separate from the events on August 8th, the fundamentals of our businesses remain strong. While we had utility equipment damage and lost the ASB branch in Lahaina, both our utility and bank have made the necessary adjustments to continue serving the people of Maui at a time when they most need us.”

Looking ahead, the company pulled its 2023 EPS guidance, saying on the earnings call that it will “revisit our ability to provide guidance as we develop better clarify” into potential impacts related to the Maui wildfires.

QUARTERLY FILING DELAYED: The utility firm also announced in a regulatory filing on Thursday that it would not be able to submit its quarterly filing with the U.S. SEC on time due to its expected contribution towards a fund to compensate victims of the deadly wildfires in Maui. On Wednesday, Hawaii’s governor Josh Green announced the One Ohana Initiative which, among other things, provides a potential path to the resolution of wrongful death and serious physical injury claims made against the companies and other defendants as a result of the August 8 Maui windstorm and wildfires. Hawaiian Electric will contribute $75M to the fund.

Hawaiian Electric further stated that none of the lawsuits against the company have been resolved in any way, and there “is no estimate of what, if any, claims may be resolved.”

STILL A RISK OF $0 EQUITY VALUE: Wells Fargo on Friday downgraded Hawaiian Electric to Underweight from Equal Weight with a price target of $8.50, up from $8. The analyst says that while some positive developments o the Maui wildfires have “infused some optimism” into Hawaiian Electric shares, there is still risk of a $0 equity value should the company be held liable. The stock comes with a high level of uncertainty with minimal insight into what the investigations are going to say or what elected officials might do, the analyst tells investors in a research note. Wells believes the stock’s probability-weighted downside is much greater than the upside at today’s stock levels.

Meanwhile, Evercore ISI lowered the firm’s price target on Hawaiian Electric to $7 from $11 and keeps an In Line rating on the shares. The company’s underlying businesses performed well in Q3 despite Hawaiian’s reallocation of resources due to the wildfire and the prefunding of its November 2023 debt maturity earlier this year and its revolver draws, plus dividend suspension, have positioned the company with liquidity runway as it works through the timing and potential impacts of litigation, the analyst tells investors. At the same time, Hawaiian suspended its EPS guidance and is also reexamining its capex plan to further mitigate the risks of extreme weather events, notes the firm, which suspects an update could result in a lower total investment program to further enhance liquidity.

SENTIMENT: Click here to check out Hawaiian Electric’s recent Media Buzz Sentiment as measured by TipRanks.

PRICE ACTION: Near midday, shares of Hawaiian Electric had fallen 12% to $12.30.