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Pinnacle West Capital Corp (PNW)
NYSE:PNW
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Pinnacle West Capital
(NYSE:PNW)
70Neutral
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
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
Earnings growth 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
$10.81B
Dividend Yield4%
Average Volume (3M)1.23M
Price to Earnings (P/E)17.3
Beta (1Y)0.21
Revenue Growth9.13%
EPS Growth21.11%
CountryUS
Employees6,403
SectorUtilities
Sector Strength88
IndustryRegulated Electric
Share Statistics
EPS (TTM)5.22
Shares Outstanding119,243,510
10 Day Avg. Volume1,328,147
30 Day Avg. Volume1,229,798
Financial Highlights & Ratios
PEG Ratio0.82
Price to Book (P/B)N/A
Price to Sales (P/S)2.18
Price to Cash Flow (P/CF)6.40
P/FCF Ratio6.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$96.90Price Target Upside6.93% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering10
Pinnacle West Capital Business Overview & Revenue Model
Company DescriptionPinnacle West Capital Corporation (PNW) is a leading energy holding company based in Phoenix, Arizona. It primarily operates through its subsidiary, Arizona Public Service (APS), which is Arizona's largest and longest-serving electric utility provider. The company is dedicated to providing reliable and sustainable energy solutions to its customers while focusing on renewable energy sources, energy efficiency, and modernizing the electric grid.
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 consistent revenue growth and strong profitability, with a solid operating cash flow. However, the company faces challenges with negative free cash flow due to high capital expenditures and a substantial debt level.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 |
| 2.06B | 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 | |||
| 23.00K | 4.96M | 4.83M | 9.97M | 59.97M | Total Assets |
| 26.10B | 24.66B | 22.72B | 22.00B | 20.02B | Total Debt |
| 1.85B | 10.30B | 8.88B | 8.18B | 6.92B | Net Debt |
| 1.85B | 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 |
| -1.99B | -1.69B | -1.62B | -1.39B | -1.28B | Financing Cash Flow |
| 375.24M | 486.68M | 371.47M | 476.92M | 361.14M |
Pinnacle West Capital Technical Analysis
Negative
90.62
Price Trends
91.15
Negative
89.06
Positive
86.45
Positive
Market Momentum
1.10
Negative
63.21
Neutral
85.09
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PNW, the sentiment is Negative. The current price of 90.62 is below the 20-day moving average (MA) of 93.07, below the 50-day MA of 91.15, and above the 200-day MA of 86.45, indicating a neutral trend. The MACD of 1.10 indicates Negative momentum. The RSI at 63.21 is Neutral, neither overbought nor oversold. The STOCH value of 85.09 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $8.74B | 19.80 | 9.65% | 3.98% | 11.63% | 5.61% | |
72 Outperform | $14.80B | 16.99 | 8.91% | 4.06% | 5.73% | 19.34% | |
72 Outperform | $15.52B | 22.49 | 10.01% | 3.31% | -1.12% | -3.22% | |
72 Outperform | $25.49B | 21.34 | 10.08% | 2.89% | 1.64% | 1.04% | |
70 Neutral | $10.81B | 17.30 | 9.42% | 4.00% | 9.13% | 21.11% | |
66 Neutral | $23.63B | 22.92 | 10.02% | 2.33% | -0.61% | 15.54% | |
65 Neutral | $11.76B | 15.57 | 6.23% | 4.62% | 5.52% | -8.96% |
* Utilities Sector Average
Performance Comparison
PNW
Pinnacle West Capital
90.62
21.45
31.01%
LNT
Alliant Energy
60.42
13.61
29.07%
AEE
Ameren
96.35
26.56
38.06%
CNP
Centerpoint Energy
36.26
9.43
35.15%
OGE
OGE Energy
43.43
11.72
36.96%
EVRG
Evergy
65.17
15.89
32.24%
Pinnacle West Capital Earnings Call Summary
Earnings Call Date: Feb 25, 2025 | % Change Since: -1.62% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call highlights strong service reliability, record energy generation, and significant financial performance and growth, including both commercial and residential sectors. However, there were challenges with earnings decline in Q4 and increased operational and financing costs. Overall, the positive aspects of growth and operational achievements outweigh the challenges faced.Highlights
Strong Service Reliability and Safety
The company delivered strong service reliability and achieved zero serious injuries or fatalities for the year, even during record-breaking heat in Phoenix.
Record Energy Demand and Generation
APS customers set a peak energy demand record of 8,210 megawatts, while Palo Verde Generating Station's three nuclear units exceeded 30 million megawatt hours of net generation with a capacity factor of 93.7%.
Financial Performance and Growth
The company ended 2024 with $5.24 per share, up 83 cents from 2023, driven by strong sales and usage growth. Customer growth was 2.1%, slightly above the midpoint of the guidance range.
Significant Commercial and Residential Growth
The company saw a robust increase in commercial and industrial growth, with 9.7% growth in the C&I segment and significant residential growth with over 32,000 new residential meters installed.
Major Investments and Expansion
The company procured nearly 7,300 megawatts of new resources for service between 2026 and 2028, marking the largest transmission and generation expansion in history.
Lowlights
Earnings Decline in Q4
The company lost six cents per share during the fourth quarter of 2024 compared to a flat result in Q4 of 2023, due to negative drivers in O&M, DNA, and financing costs.
Increased Operational and Financing Costs
Increases in O&M, DNA, and debt financing costs, as well as share dilution from equity issuance, offset the benefits of sales growth.
Company Guidance
During the call, the company provided guidance on several key metrics for 2025 and beyond. The 2025 weather-normalized sales growth is projected to remain between 4% and 6%, with an emphasis on the commercial and industrial (C&I) segment contributing 3% to 5%. The company reiterated its commitment to a long-term earnings per share (EPS) growth rate of 5% to 7%, based on a midpoint of $4.60 to $4.80 per share from the original 2024 guidance. In 2024, the company achieved an EPS of $5.24, marking an increase of 83 cents from the previous year, driven by new rates, strong sales growth, and favorable weather conditions. The company also saw customer growth at 2.1% and plans to manage a balanced capital investment strategy, focusing on generation, transmission, and distribution to support Arizona's economic expansion, with a significant investment in new resources slated for service between 2026 and 2028.Pinnacle West Capital Corporate Events
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.