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Pinnacle West Capital Corp (PNW)
NYSE:PNW

Pinnacle West Capital (PNW) AI Stock Analysis

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Pinnacle West Capital

(NYSE:PNW)

Rating:65Neutral
Price Target:
$97.00
▲(5.94%Upside)
Pinnacle West Capital's overall score reflects strong revenue growth and operational efficiency, offset by high debt levels and negative cash flow. Technical analysis suggests neutral momentum, while valuation is attractive with a decent dividend yield. Economic and customer growth prospects are positive, but current financial challenges and regulatory uncertainties require cautious optimism.
Positive Factors
Demand 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.
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.
Regulatory Environment
An improving regulatory environment bolstered by the implementation of alternative ratemaking parameters has the potential to improve the company’s earned ROEs and linearize EPS growth.
Negative Factors
Regulatory Proceedings
Regulatory proceeding, especially in a jurisdiction with a historically noisy commission, asymmetrically skews risk/reward to the downside in the near-term.
Regulatory Risk
Regulatory execution is critical over the next 12-18 months, which will likely limit multiple expansion in the interim.
Valuation Concerns
Regulatory execution is the critical path over the next 12-18 months, which likely limits multiple expansion in the interim and any regulatory proceeding asymmetrically skews risk/reward to the downside in the near-term.

Pinnacle West Capital (PNW) vs. SPDR S&P 500 ETF (SPY)

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 Earnings Call Summary

Earnings Call Date:May 01, 2025
(Q1-2025)
|
% Change Since: -2.89%|
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 Financial Statement Overview

Summary
Pinnacle West Capital shows strong revenue growth and operational efficiency with solid margins. However, high debt levels and negative free cash flow present risks, requiring careful management of debt and capital expenditures.
Income Statement
75
Positive
Pinnacle West Capital's revenue has shown a consistent upward trend, growing from $3.8 billion in 2021 to $5.2 billion in TTM (Trailing-Twelve-Months) 2025. The gross profit margin is robust at approximately 37.1% for TTM 2025, indicating effective cost management. The net profit margin for TTM 2025 is around 11.3%, demonstrating stable profitability. The EBIT margin is strong at 19.3%, and EBITDA margin is even stronger at 39.2%, reflecting efficient operations. However, the net income has slightly declined from the previous year, indicating potential challenges in maintaining net profitability.
Balance Sheet
68
Positive
The debt-to-equity ratio for TTM 2025 is approximately 1.8, suggesting a higher reliance on debt financing, which could pose risks if not managed carefully. The return on equity (ROE) is around 8.7%, indicating moderate efficiency in generating profits from shareholders' equity. The equity ratio is about 24.7%, reflecting a moderate level of equity financing relative to total assets. While the company maintains a stable financial structure, the high debt level warrants caution.
Cash Flow
60
Neutral
Operating cash flow has increased to $1.66 billion in TTM 2025, indicating good cash generation from operations. However, the free cash flow remains negative at -$689.6 million, primarily due to substantial capital expenditures, which might impact liquidity. The operating cash flow to net income ratio is approximately 2.8, reflecting strong cash flow relative to net income. The negative free cash flow to net income ratio highlights the need for careful management of capital investments.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
5.21B5.12B4.70B4.32B3.80B3.59B
Gross Profit
1.93B2.14B1.84B1.71B1.70B1.63B
EBIT
1.01B1.01B824.64M731.91M805.31M788.15M
EBITDA
2.04B2.07B1.72B1.65B1.64B1.53B
Net Income Common Stockholders
587.30M608.81M501.56M483.60M618.72M550.56M
Balance SheetCash, Cash Equivalents and Short-Term Investments
10.05M3.84M4.96M4.83M9.97M59.97M
Total Assets
27.24B26.10B24.66B22.72B22.00B20.02B
Total Debt
12.13B11.05B10.30B8.88B8.18B6.92B
Net Debt
12.12B11.04B10.30B8.87B8.17B6.86B
Total Liabilities
20.39B19.25B18.38B16.56B15.98B14.27B
Stockholders Equity
6.74B6.75B6.18B6.05B5.91B5.63B
Cash FlowFree Cash Flow
-689.63M-639.37M-638.67M-466.05M-613.46M-360.22M
Operating Cash Flow
1.66B1.61B1.21B1.24B860.01M966.37M
Investing Cash Flow
-2.10B-1.93B-1.69B-1.62B-1.39B-1.28B
Financing Cash Flow
431.70M322.69M486.68M371.47M476.92M361.14M

Pinnacle West Capital Technical Analysis

Technical Analysis Sentiment
Positive
Last Price91.56
Price Trends
50DMA
92.21
Negative
100DMA
89.62
Positive
200DMA
87.94
Positive
Market Momentum
MACD
-0.37
Positive
RSI
49.57
Neutral
STOCH
61.37
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 91.56 is below the 20-day moving average (MA) of 91.87, below the 50-day MA of 92.21, and above the 200-day MA of 87.94, indicating a neutral trend. The MACD of -0.37 indicates Positive momentum. The RSI at 49.57 is Neutral, neither overbought nor oversold. The STOCH value of 61.37 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 1 New Risks
1.
We may not have adequate insurance coverage for liabilities. Q4, 2024

Pinnacle West Capital Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
LNLNT
78
Outperform
$15.85B21.2910.71%3.20%2.46%5.66%
AEAEE
72
Outperform
$26.64B21.3610.23%2.82%8.96%3.75%
OGOGE
70
Neutral
$8.97B18.4810.72%3.80%15.56%21.90%
68
Neutral
$15.24B17.458.95%3.98%5.53%23.00%
CNCNP
67
Neutral
$24.63B25.379.22%2.21%4.76%4.08%
PNPNW
65
Neutral
$10.84B18.039.08%3.91%10.69%12.37%
64
Neutral
$8.54B10.244.67%4.36%4.12%-13.19%
* Utilities Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
PNW
Pinnacle West Capital
91.56
18.13
24.69%
LNT
Alliant Energy
62.25
14.03
29.10%
AEE
Ameren
96.69
27.70
40.15%
CNP
Centerpoint Energy
37.73
8.98
31.23%
OGE
OGE Energy
44.55
10.56
31.07%
EVRG
Evergy
66.23
15.15
29.66%

Pinnacle West Capital Corporate Events

Executive/Board ChangesShareholder Meetings
Pinnacle West Capital Shareholders Approve Key Proposals
Neutral
May 22, 2025

On May 21, 2025, Pinnacle West Capital Corporation held its Annual Meeting of Shareholders, where five key proposals were voted on. The shareholders elected eleven directors for one-year terms, approved executive compensation, ratified Deloitte & Touche LLP as the independent accountant for 2025, and agreed to amend the company’s articles to increase authorized common stock. However, a proposal to improve special shareholder meetings was rejected.

The most recent analyst rating on (PNW) stock is a Hold with a $95.00 price target. To see the full list of analyst forecasts on Pinnacle West Capital stock, see the PNW Stock Forecast page.

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.

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.

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.