HEI gets stock upgrade

By Dave Segal

Hawaiian Electric Industries Inc., which yesterday reported a 21 percent jump in second-quarter earnings, was upgraded to "market outperform" today by analyst Dave Parker of Tampa, Fla.-based brokerage Robert W. Baird & Co.

Hawaiian Electric Industries Parker, who raised his 12-month price target to $46, cited recent stock weakness, a sustainable 6.8 percent dividend yield and 6 percent earnings-per-share growth that appears to be on track based on the company's earnings. Parker had maintained a "market perform" rating on the stock since downgrading it from "market outperform" on Aug. 27, 2001 when the stock was trading at $40.74.

Analyst Dave Schanzer of Philadelphia-based brokerage Janney Montgomery Scott today reiterated his "buy" rating on the shares.

HEI's stock fell 99 cents today to $35.45, with its dividend yield rising to 7 percent. Shares of the company are down 12 percent year to date.

The company, which received a big boost from its American Savings Bank subsidiary, posted net income of $31 million, or 85 cents a share, compared with $25.6 million, or 76 cents a share, a year ago. Revenues, however, fell 4.3 percent to $409 million from $427.3 million a year ago.

American Savings Bank benefited from lower interest rates and earned $14.8 million, a 45.1 percent increase over $10.2 million a year ago.

HEI's electric utility business earned $23.9 million, a 5 percent gain over $22.7 million in the second quarter of 2001.

"We had a strong second quarter," said Robert F. Clarke, HEI chairman, president and chief executive.

HEI had $524,000 in discontinued operations in the second quarter of 2001 related to expenses from HEI Power Corp.'s international operations.

The company -- which doesn't break out the bank's assets, deposits and loans -- said the interest rate spread was 3.31 percent in the quarter compared with 3.07 percent a year ago. Noninterest income, which includes revenue from service charges and fees, jumped 38.8 percent to $13.4 million from $9.7 million a year ago. Net interest income, which is interest earned on loans and investments minus interest paid on deposits, rose 7.7 percent to $49.3 million from $45.8 million a year ago. The bank maintained its provision for loan losses at $3 million from the year-earlier quarter.

Meanwhile, Chris Smith, a financial adviser for Robert W. Baird in Milwaukee, said he has been recommending the stock to suitable clients. "We love that stock," he said. "It's got a great dividend."

Smith, who noted his brokerage did some investment banking as part of HEI's secondary offering, said he likes the diversification of the company owning both a utility and a bank.

"It's utility has got price sensitivity to oil and the bank is subject to interest-rate risk, but as long as it's a good fit for my clients, the company gets a lot of attention around here."

Bloomberg News lists seven analysts as covering the company, with two rating the stock a "buy," four a "hold" and one a "sell."

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