Pinnacle West Capital Corporation (NYSE: PNW) has delivered an impressive result for the fourth quarter of 2021. Its earnings surpassed the consensus estimate by a whopping 380%, while the sale exceeded the same by 21.1%.
Shares of Pinnacle West increased 6.8% on Friday, ending the trading session at $71.99.
Pinnacle West, a utility holding company, provides electricity and related products in the U.S. state of Arizona. Electricity generation is done through gas, coal, solar, nuclear, and gas-based facilities. Its principal subsidiary is Arizona Public Service Company (APS).
Quarterly Highlights
Pinnacle West reported earnings of $0.24 per share for the fourth quarter, surpassing the consensus estimate of $0.05. On a year-over-year basis, the bottom line marked improvement over the loss of $0.17 per share on the back of growth witnessed in revenues and operating income.
Quarterly revenues totaled $798.9 million, up 7.8% from the year-ago quarter. The figure also exceeded the Street’s estimate of $659.7 million.
Operating expenses during the quarter increased 5.5% year-over-year to $748.8 million while operating income grew 62.1% to $50 million.
Annual Highlights
In 2021, the company’s earnings stood at $5.47 per share, reflecting an increase of 12.3% from the previous year. Revenues generated were $3,803.8 million, up 6% from the previous year. The regulated electricity revenues (less of purchased power and fuel expenses) were $2,645 in the year, up 2.2% year-over-year. Meanwhile, APS recorded a 2.2% rise in retail customers.
Exiting 2021, the company’s cash and cash equivalents were roughly $10 million, down 83.4% year-over-year. Long-term debts, net of current portions, were $6,913.7 million, reflecting growth of 9.5% from 2020-end.
Cash flow generated from operating activities was down 11% year-over-year to $860 million in 2021, while capital expenditures increased 11.1% to $1,473.5 million.
Management’s Comments
The Chairman, President, and CEO of Pinnacle West, said, “Though operational and financial rigor were key to our strong performance in 2021, we anticipate near-term headwinds due to the unfavorable outcome in our recent rate case.”
He added, “As a result of that decision, 2022 will be a financial reset year with projections significantly lower than what we achieved in 2021.”
Guidance: 2022 and Long Term
Pinnacle West anticipates earnings to be within the $3.90-$4.10 per share range for 2022. The mid-point of $4 per share is below $5.47 reported in 2021.
The unfavorable decision in the 2019 Rate Case is predicted to dampen earnings by $0.90 per share, while interest will hurt by $0.24, and depreciation and amortization to leave an adverse impact of $0.29. Retail customer growth is anticipated to range from 1.5% to 2.5% in 2022. Capital expenditure during the year is expected to total $1.53 billion.
For the long term, the company predicts earnings per share to increase in the range of 5% to 7% and retail customers between 1.5% and 2.5%.
Capital Deployment
In 2021, Pinnacle West rewarded its shareholders with dividend payments, totaling $369.5 million. This reflects an increase of 5.4% year-over-year.
Wall Street’s Take
The stock presently has a Hold consensus rating based on 1 Buy, 5 Holds, and 1 Sell. The average Pinnacle West price target of $70.43 suggests a 2.17% downside risk from the current levels. Over the past year, shares of Pinnacle West have gained 4.1%.
Smart Score
According to TipRanks’ Smart Score system, Pinnacle West gets 7 out of 10, indicating that the stock will likely perform in line with the market.
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