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Pinnacle West Capital (PNW)
:PNW
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Pinnacle West Capital
(NYSE:PNW)
70Outperform
Positive Factors
Earnings performance
PNW reported Q4/FY'24 operating EPS of -$0.06/$5.24 vs. $0.00/$4.41 in the prior year periods, which were above both Consensus and BofA estimates.
Long-term growth prospects
TSMC's plans are expected to have a significant positive impact on Pinnacle West Capital's long-term growth with over 500MW of demand projected.
Regulatory environment
Ongoing economic development announcements and Arizona's improving regulatory framework support Pinnacle West Capital's rate base and EPS growth.
Negative Factors
2025 financial challenges
2025 EPS growth is likely to be challenged by several headwinds, including non-recurring items and increased dilution.
Regulatory challenges
PNW faces a regulatory lag expected through 2026, impacting earnings per share estimates.
Stock valuation
The stock is downgraded to Equal Weight, indicating it is skewing more to fair value.
Pinnacle West Capital (PNW) vs. S&P 500 (SPY)
Market Cap
$11.26B
Dividend Yield3.76%
Average Volume (3M)1.37M
Price to Earnings (P/E)18.0
Beta (1Y)0.19
Revenue Growth9.13%
EPS Growth21.11%
CountryUS
Employees6,400
SectorUtilities
Sector Strength87
IndustryRegulated Electric
Share Statistics
EPS (TTM)5.22
Shares Outstanding119,399,010
10 Day Avg. Volume1,318,500
30 Day Avg. Volume1,366,408
Financial Highlights & Ratios
PEG Ratio0.85
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.85
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit9.75
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$97.65Price Target Upside3.53% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering11
Pinnacle West Capital Business Overview & Revenue Model
Company DescriptionPinnacle West Capital Corporation, through its subsidiary, Arizona Public Service Company, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include approximately 5,814 pole miles of overhead lines and approximately 74 miles of underground lines; and distribution facilities comprise approximately 11,258 miles of overhead lines and approximately 22,821 miles of underground primary cable, as well as owns and maintains 475 transmission and distribution substations. The company also owns or leases approximately 6,323 megawatts of regulated generation capacity. It serves approximately 1.3 million customers. Pinnacle West Capital Corporation was incorporated in 1985 and is headquartered in Phoenix, Arizona.
How the Company Makes MoneyPinnacle West Capital Corporation generates revenue primarily through its regulated electric utility operations under Arizona Public Service (APS). APS serves residential, commercial, and industrial customers by generating, transmitting, and distributing electricity across Arizona. The company's revenue model is largely based on regulated electricity rates approved by the Arizona Corporation Commission (ACC), which allows the company to recover costs and earn a return on investments made in infrastructure and service improvements. Additionally, Pinnacle West invests in renewable energy projects and energy efficiency programs, which are supported by regulatory incentives and contribute to its revenue streams. The company's financial performance is influenced by factors such as customer demand, regulatory decisions, fuel costs, and operational efficiencies.
Pinnacle West Capital Financial Statement Overview
Summary
Pinnacle West Capital shows steady revenue growth with improving net profit margin, but faces challenges with high debt and negative free cash flow. Operating cash flow is strong, but the company must improve free cash flow and manage its debt effectively.Income Statement
Pinnacle West Capital shows a positive revenue growth trend with revenue increasing steadily over the years, with a notable increase of 9.12% from 2022 to 2023. Gross profit margin remains strong at 100% due to the company's nature as a utility. The net profit margin improved from 10.68% in 2022 to 11.88% in 2023, reflecting enhanced profitability. EBITDA margin is solid at approximately 33.54% for 2023, indicating efficient operations. However, the EBIT margin decreased slightly from 17.56% to 16.58% in the same period.75
Positive
Balance Sheet
The company's balance sheet shows a stable equity position with stockholders' equity increasing to $6.75 billion in 2024. The debt-to-equity ratio has improved over the years, moving from 1.60 in 2022 to 1.50 in 2023, reflecting better leverage management. The equity ratio is around 27.36% in 2023, indicating a reasonable level of equity financing. However, the total debt remains high, which could pose risks if not managed effectively.70
Positive
Cash Flow
Operating cash flow has seen a healthy increase of 33.32% from 2023 to 2024, highlighting improved cash generation from operations. However, free cash flow remains negative, impacted by significant capital expenditures, which is a concern. The operating cash flow to net income ratio is favorable at 2.64 in 2024, showcasing strong cash conversion. Attention is needed on sustaining investment efficiency to improve free cash flow.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 5.12B | 4.70B | 4.32B | 3.80B | 3.59B | Gross Profit |
| 2.14B | 1.84B | 1.71B | 1.70B | 1.63B | EBIT |
| 1.01B | 824.64M | 731.91M | 805.31M | 788.15M | EBITDA |
| 2.07B | 1.72B | 1.65B | 1.64B | 1.53B | Net Income Common Stockholders |
| 608.81M | 501.56M | 483.60M | 618.72M | 550.56M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 3.84M | 4.96M | 4.83M | 9.97M | 59.97M | Total Assets |
| 27.25B | 24.66B | 22.72B | 22.00B | 20.02B | Total Debt |
| 11.05B | 10.30B | 8.88B | 8.18B | 6.92B | Net Debt |
| 11.04B | 10.30B | 8.87B | 8.17B | 6.86B | Total Liabilities |
| 19.25B | 18.38B | 16.56B | 15.98B | 14.27B | Stockholders Equity |
| 6.75B | 6.18B | 6.05B | 5.91B | 5.63B |
| Cash Flow | Free Cash Flow | |||
| -639.37M | -638.67M | -466.05M | -613.46M | -360.22M | Operating Cash Flow |
| 1.61B | 1.21B | 1.24B | 860.01M | 966.37M | Investing Cash Flow |
| -1.93B | -1.69B | -1.62B | -1.39B | -1.28B | Financing Cash Flow |
| 322.69M | 486.68M | 371.47M | 476.92M | 361.14M |
Pinnacle West Capital Technical Analysis
Positive
94.32
Price Trends
92.98
Positive
89.45
Positive
87.97
Positive
Market Momentum
0.57
Negative
53.34
Neutral
57.61
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PNW, the sentiment is Positive. The current price of 94.32 is above the 20-day moving average (MA) of 93.09, above the 50-day MA of 92.98, and above the 200-day MA of 87.97, indicating a bullish trend. The MACD of 0.57 indicates Negative momentum. The RSI at 53.34 is Neutral, neither overbought nor oversold. The STOCH value of 57.61 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PNW.
Pinnacle West Capital Risk Analysis
Pinnacle West Capital disclosed 27 risk factors in its most recent earnings report. Pinnacle West Capital reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Pinnacle West Capital Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $26.50B | 22.19 | 10.08% | 2.77% | 1.64% | 1.04% | |
72 Outperform | $15.93B | 18.28 | 8.91% | 3.83% | 5.73% | 19.34% | |
72 Outperform | $15.71B | 22.77 | 10.01% | 3.26% | -1.12% | -3.22% | |
72 Outperform | $9.08B | 20.57 | 10.72% | 3.75% | 15.56% | 21.90% | |
70 Outperform | $11.26B | 18.01 | 9.08% | 3.76% | 9.13% | 21.11% | |
67 Neutral | $25.45B | 26.21 | 9.22% | 2.13% | 4.76% | 4.08% | |
63 Neutral | $8.48B | 11.89 | 5.79% | 4.37% | 3.17% | -10.89% |
* Utilities Sector Average
Performance Comparison
PNW
Pinnacle West Capital
94.32
20.64
28.01%
LNT
Alliant Energy
61.17
12.34
25.27%
AEE
Ameren
99.48
27.90
38.98%
CNP
Centerpoint Energy
38.99
10.47
36.71%
OGE
OGE Energy
45.11
11.01
32.29%
EVRG
Evergy
69.25
17.57
34.00%
Pinnacle West Capital Earnings Call Summary
Earnings Call Date:May 01, 2025
(Q1-2025)
| % Change Since: -0.90%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant economic growth and operational improvements, particularly in Arizona's semiconductor sector and customer growth. However, financial challenges such as decreased earnings and higher operational costs were noted. The upcoming regulatory changes are expected to address some of these issues.Q1-2025 Updates
Positive Updates
Strong Economic Growth in Arizona
Arizona's economy is thriving, with significant investments in semiconductor and advanced manufacturing sectors. Notable announcements include TSMC's additional $100 billion investment beyond their original $65 billion, and NVIDIA's partnership with TSMC.
Robust Customer Growth
Customer growth for Q1 2025 was strong at 2.3%, near the high end of the annual guidance. Maricopa County and Pinal County are among the fastest-growing in the U.S.
Successful Operational Measures
Significant investments in grid reliability and summer preparedness, including fire-sensing cameras and chiller upgrades, have been completed.
Positive Regulatory and Credit Updates
No changes in credit ratings with a stable outlook, and progress on upcoming rate case filing to address regulatory lag.
Negative Updates
Decrease in Q1 2025 Earnings
Loss of $0.04 per share compared to earnings of $0.15 per share in Q1 2024, primarily due to the sale of Bright Canyon Energy and increased O&M, interest expense, and depreciation.
Impact of Higher O&M and Interest Expenses
Higher operational and maintenance costs due to planned outages and IT project expenses were a drag on the first quarter results.
Adjustment in Revenue Recognition
A one-time adjustment to estimates of unbilled revenues affected sales growth by 1.9%.
Company Guidance
During the Pinnacle West Capital Corporation 2025 First Quarter Earnings Conference Call, the company reaffirmed its financial guidance, maintaining its target for a 4% to 6% weather-normalized sales growth for the year. The first quarter of 2025 saw a loss of $0.04 per share, compared to a profit of $0.15 per share in the same period last year, primarily due to the sale of Bright Canyon Energy and increased O&M, interest expenses, and depreciation. However, rate changes introduced in March 2024 provided a $0.29 year-over-year benefit this quarter. Customer growth was strong at 2.3%, and the company remains on track to meet its annual customer growth guidance. The call also highlighted the thriving Arizona economy, with notable investments such as Taiwan Semiconductor Manufacturing Company's $165 billion in semiconductor facilities, and Mayo Clinic's $2 billion investment in Phoenix. Pinnacle West is focused on maintaining reliable service through increased transmission investments and is progressing with a request for proposals for at least 2,000 megawatts of new resources to be operational between 2028 and 2030. Additionally, the company plans to file a rate case midyear, aiming to address regulatory lag with a formula rate proposal to keep rates current while maintaining customer affordability.Pinnacle West Capital Corporate Events
Business Operations and StrategyFinancial Disclosures
Pinnacle West Capital Reports Q1 2025 Net Loss
Negative
May 1, 2025
Pinnacle West Capital Corp. reported a net loss of $4.6 million for the first quarter of 2025, compared to a net income of $16.9 million in the same period of 2024, primarily due to increased operations and maintenance expenses and other financial factors. Despite these results, the company remains optimistic about achieving its annual targets, supported by robust customer and electricity sales growth, and continues to focus on summer preparedness and enhancing customer experiences with advanced technology and infrastructure improvements.
Spark’s Take on PNW Stock
According to Spark, TipRanks’ AI Analyst, PNW is a Neutral.
Pinnacle West Capital demonstrates solid financial health and growth prospects, supported by strong earnings and strategic investments. The upward technical momentum is promising, though caution is advised due to potential overbought conditions. Valuation is reasonable, with an attractive dividend yield, making it appealing for income investors.
To see Spark’s full report on PNW stock, click here.
Business Operations and Strategy
Pinnacle West Capital Highlights Growth and Clean Energy Future
Positive
Mar 3, 2025
In March 2025, Pinnacle West Capital Corporation will engage with securities analysts and investors, highlighting its growth outlook and energy future. The company is optimistic about its rapidly growing service territory in Arizona, improved regulatory environment, and progress toward clean energy commitments. Pinnacle West is also focusing on customer affordability and strategic transmission opportunities to support its expansion and maintain competitive rates.
Business Operations and StrategyFinancial Disclosures
Pinnacle West Capital Reports Strong 2024 Net Income Growth
Positive
Feb 25, 2025
Pinnacle West Capital Corp. reported a significant increase in net income for 2024, with a consolidated net income of $608.8 million, up from $501.6 million in 2023. This growth was driven by new customer rates, increased customer usage, and a hot summer, despite higher operational costs. The company is focusing on expanding its energy capacity with plans to add 9,805 megawatts of renewable power, battery storage, and natural gas by 2028 to meet the growing demand from a diversified customer base. APS, its main subsidiary, saw a 2.1% customer growth in 2024 and expects continued growth due to new commercial and industrial developments, including semiconductor manufacturing and data centers.
Executive/Board Changes
Pinnacle West Capital Announces Executive Leadership Changes
Neutral
Feb 19, 2025
On February 19, 2025, Pinnacle West Capital Corporation and Arizona Public Service Company announced executive changes, with Robert E. Smith taking on the roles of Executive Vice President, Chief Legal Officer, and Chief Development Officer, while Shirley A. Baum was promoted to Senior Vice President and General Counsel. These changes are effective immediately and are part of a transition plan due to Mr. Smith’s planned retirement on August 1, 2025.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.