Hawaiian Electric Q1 2026 slides: settlement paid, costs pressure earnings By Investing.com

Hawaiian Electric reported Q1 2026 core EPS of $0.18, flat year over year, while core net income fell 22.1% to $31.0 million as higher O&M costs and interest expense offset $5.8 million of revenue growth. The company completed its first $479 million wildfire settlement payment, but remains under pressure from elevated capex, regulatory rate proceedings, and customer affordability concerns. Shares fell 3.89% during regular trading after the results.

Analysis

HE is transitioning from a crisis-liability cleanup story into a slower-moving regulated-earnings compounding story, but the near-term setup is still a tug-of-war between allowed-return expansion and cost creep. The key second-order dynamic is that wildfire settlement funding plus accelerated capex create a larger rate base and a more levered balance sheet before the company has fully rebuilt earnings power, so equity upside is increasingly dependent on regulatory timing rather than operating performance. That means the market is likely underpricing the duration risk: even “good” projects can dilute near-term ROE if recovery lags.

The most important beneficiary set is not HE alone, but vendors tied to grid hardening, substation work, transformers, turbine equipment, and utility engineering services. However, those same supply chains are becoming a source of margin leakage for HE because inflation is being locked in faster than recovery mechanisms can fully offset it. Competitively, the company’s push toward cleaner, more resilient generation and solar-plus-storage should support islanded distributed energy players, while making imported liquid-fuel generation less attractive over time if rate design shifts continue.

The market is likely missing that the biggest catalyst is regulatory sequencing, not headline capex or settlement payments. If the PUC allows faster pass-through on wildfire and repowering costs, the stock can rerate on lower financing risk over the next 6-12 months; if not, equity holders effectively fund a stretched bridge to 2027-2029 recovery with limited upside. The contrarian view is that the settlement plus visible liquidity may actually reduce tail-risk enough to make the stock less broken than assumed, but that requires confidence the next rate case doesn’t become a political affordability fight.

The cleanest asymmetry is to trade the gap between de-risking and recovery: downside is capped by improving credit optics, but upside is capped until regulators confirm cost recovery and a higher allowed-return path. In that sense, the stock looks more like a slow-burn bond proxy than an operational turnaround, and the market may still be treating it as if the worst is behind it when the real earnings inflection is mostly rate-case dependent.

Key Decisions for Investors

• Hold a small tactical long in HE only into regulatory milestones over the next 3-6 months; target a rerating if the PUC process signals expedited recovery, but cut quickly if affordability rhetoric delays decisions.
• Short-dated call spread on HE (3-6 months) to express upside from de-risking without paying for a full rerate; risk/reward improves if the stock breaks above the post-earnings range and volatility remains elevated.
• Pair trade: long regulated utilities with cleaner ROE visibility / short HE over the next 6-12 months, capturing the valuation discount created by regulatory and settlement overhang while hedging market beta.
• Look at suppliers exposed to Hawaiian utility capex and grid hardening as a relative long over 12 months, since HE’s multi-year capex ramp implies persistent order flow even if equity recovery is delayed.
• Avoid adding on weakness until the rate rebasing and EPRM approvals are clarified; the next leg down would likely come from a regulatory timing miss, not from operating performance.