On Tuesday, Hawaiian Electric (NYSE:HE) shares received a new coverage from a Jefferies analyst with a Hold rating and a price target set at $11.50. While the company has not been profitable over the last twelve months according to InvestingPro data, analysts predict a return to profitability this year.
The analyst provided insights into the company's future financial projections, adjusting the forecast for the fiscal years 2025 and 2026 to account for recent mergers, acquisitions, and divestitures. InvestingPro analysis reveals the company maintains strong liquidity, with liquid assets exceeding short-term obligations.
The adjustments made by the analyst include a slight reduction of approximately $1 million in the FY25 EBITDA estimate due to the net impact of M&A activities and divestitures. Conversely, the FY26 earnings per share (EPS) estimate was increased by about $2 million, reflecting the expected modest commercial synergies from the Medical (TASE:PMCN) Adhesives business.
Despite the changes in EPS being considered negligible, due to a balance between lower depreciation and amortization expenses and slightly higher interest rate assumptions, the analyst recalculated the valuation multiples for the year 2025.
The price-to-earnings (P/E) multiple was estimated at approximately 17.5 times, up from 17 times previously, and the enterprise value to EBITDA (EV/EBITDA) multiple at around 10.3 times, increasing from 10 times. Moreover, the analyst factored in an increase of roughly $110 million to pro forma net debt to reflect the net cash outflow from the transactions.
The new price target represents a slight increase of $2 to $85, indicating a belief in modestly higher valuation multiples. This adjustment is attributed to a modest change in the company's portfolio composition, which is now more inclined towards sectors with higher margins and growth potential.
Despite the positive outlook on the company's portfolio, the firm maintains a cautious stance, opting for a Hold rating due to uncertainties surrounding consumer demand in key markets such as automobiles, solar energy, and general durable goods.
In other recent news, Hawaiian Electric Industries Inc (NYSE:HE). (HEI) reported significant financials in its Third Quarter 2024 Earnings Call. The company registered a consolidated net loss of $104.4 million, largely due to one-time wildfire liabilities and an asset impairment charge. However, when excluding these items, the company's core net income stood at $52.2 million.
HEI has also reached a settlement related to Maui wildfire tort litigation, amounting to $1.99 billion to be paid in four equal installments starting in late 2025. As part of its recent developments, the company has implemented a public safety power shutoff program and other advanced technologies for wildfire risk mitigation.
HEI has also improved its liquidity position, with cash reserves for the company and its utility standing at approximately $678 million and $148 million, respectively, following a successful equity offering. The company is conducting strategic reviews for its assets and is in the process of developing a comprehensive wildfire mitigation plan.
According to analyst notes, the company has shown confidence in its financial stability and ability to address future challenges. This includes the impact of the Maui wildfires on future rate plans and operations.
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