Hawaiian Electric (HE) Q1 2026 Earnings Transcript

Hawaiian Electric reported Q1 2026 net income of $30.5 million, or $0.18 per share, up from $26.7 million a year ago, while core net income fell to $31 million from $39.8 million due to higher O&M and weather-related costs. The company finalized the Maui wildfire settlement and made the first $479 million payment, but it expects higher 2026 expenses, maximum negative impact from the fuel cost risk-sharing mechanism, and additional financing needs for future settlement payments. Management also filed a 5.3% base-rate rebasing proposal, received approval for the $908 million Waial repowering project, and noted nearly $1 billion in liquidity plus a Moody’s upgrade to Ba1/Ba2.

Analysis

The core setup is a classic regulated-utility squeeze: the legal overhang is finally gone, but the near-term earnings bridge is now dominated by weather, fuel pass-through lag, and regulatory latency. That combination is bullish for credit first, equity second; the rating action matters more than the modest EPS beat because it lowers the probability of forced dilution or punitive refinancing spreads before the next settlement payment.

The more interesting second-order effect is that management is effectively front-loading capex and recovery risk into a period when affordability is politically sensitive. In that regime, the PUC is likely to scrutinize the rate case more than the company’s requested numbers imply, so the biggest earnings surprise over the next 6-12 months may be not the size of the rate award, but the timing and construct of recovery. If approval drifts, AFUDC helps on paper, but cash conversion and ROE optics weaken just as fuel-related bad debt and O&M inflation are peaking.

Consensus may be underestimating how much of the equity story now depends on spread compression rather than operating performance. With one settlement payment already made and the next one likely financed opportunistically, the equity becomes a residual claim on regulatory trust: if the market believes the utility can earn a constructive outcome on rebasing and wildfire rulemaking, the stock can re-rate; if not, the path is capped by capital needs and policy risk. The best risk/reward is likely in the credit stack, not the common, until the rate case process becomes more visible.

Key Decisions for Investors

• Long HE bonds / preferred exposure over HE common for the next 6-12 months: credit benefits first from settlement resolution and Moody’s upgrade, while equity remains exposed to regulatory timing and capex recovery risk.
• If trading HE common, use a staggered long only after a visible PUC procedural schedule on rebasing; the catalyst is procedural clarity, not the filing itself. Target upside on a constructive rate-case path, but cut if decision timing slips into 2027.
• Pair trade: long HE vs short a less-regulated, capex-heavy utility with similar climate exposure if you expect Hawaii-specific regulatory support to outperform peers on credit repricing.
• Avoid chasing the stock into fuel-price spikes; elevated oil mainly pressures customer affordability and increases bad-debt/PUC pushback risk, so the next 1-2 quarters are more likely to compress multiples than expand them.
• Optionality trade: buy medium-dated downside protection on HE common into any rally tied to the settlement milestone, since the next leg of value creation depends on uncertain rate recovery and could take 12-18 months.