Hawaiian Electric Industries, Inc. (HE) Income Statement

The 25.9% YoY revenue growth in 2026Q2 appears driven by fuel cost pass-through and decoupling adjustments, not organic load growth. The 65.5% YoY surge in 2025Q4 similarly suggests timing of regulatory recoveries. However, the -15.7% YoY decline in 2025Q3 indicates that revenue is highly volatile, likely due to fuel price swings and rate case timing. This volatility complicates the assessment of underlying demand, which may be weakening given the -4.1% YoY revenue contraction noted in recent context.

The 2026Q2 operating margin of 21.7% appears to be an outlier, likely benefiting from one-time items or regulatory settlements. The more consistent operating margins in the 6-8% range during 2025 suggest that the utility is earning below its authorized ROE, especially when considering the massive charges in 2024. The gap between authorized and earned returns may be widening due to regulatory scrutiny and litigation costs, which could compress future margins. Investors should monitor whether the PUC allows recovery of wildfire mitigation costs, as this will determine margin sustainability.

The gross margin of 7.62% is consistent with a utility that passes through fuel costs, leaving little room for operational error. However, the spike in D&A in 2026Q2 to $374M from $66.5M in 2026Q1 appears to be a non-recurring impairment or accelerated depreciation, possibly related to wildfire-related asset write-offs. This suggests that while fuel costs are recoverable, other operating costs such as wildfire mitigation and legal expenses may not be fully recoverable, straining cash flow. The regulatory construct may provide timely recovery for fuel, but the increasing cost of capital and legal liabilities could create working capital strain.

The company's ability to invest in rate base growth is likely impaired by its financial condition. The drawdowns on revolving credit facilities and the suspension of the dividend suggest that cash is being preserved for litigation and operational needs, not for CAPEX. Without incremental CAPEX, rate base growth will be limited, and future earnings growth will be constrained. Even if CAPEX resumes, the high cost of capital and regulatory uncertainty may mean that new investments earn below the authorized ROE, failing to translate into EPS growth.

The 2024Q2 net loss of -$1.3B and the negative operating income in 2024Q3 reflect the direct impact of wildfire-related liabilities. This inflection has shifted the company from a stable regulated utility to a distressed asset, with the market pricing in significant risk. The earnings profile is now dependent on litigation outcomes and regulatory decisions, rather than on rate base growth. The durability of any recovery is uncertain, as the company faces potential inverse condemnation claims that could exceed its insurance coverage.