Based in Phoenix, Arizona, Pinnacle West Capital Corporation (PNW) is committed to providing reliable and sustainable electricity. The company boasts a market cap of $10.6 billion and operates primarily through its subsidiary, Arizona Public Service (APS), which serves over 1.3 million customers throughout Arizona.
Mixed Performance in a Volatile Market
Over the past 52 weeks, PNW shares have increased by 26.2%, which is below the broader S&P 500 Index ($SPX) that gained nearly 31%. However, in 2024, PNW is showing stronger results, up 29.4% year-to-date compared to the SPX’s 25.2% increase.
When compared to the Utilities Select Sector SPDR Fund (XLU), which has risen by 30.3% in the same timeframe, PNW’s performance appears less favorable.
Strong Q3 Earnings Offer Hope
Concerns around regulatory risks and potential shifts in energy policy have clouded Pinnacle West’s performance. However, on November 6, PNW saw a 3.9% increase in share prices following a positive Q3 earnings report. The company’s earnings per share (EPS) reached $3.37, surpassing the forecast of $3.35, albeit down by 3.7% compared to the previous year.
Revenue for the quarter was reported at $1.77 billion—above expectations of $1.68 billion—highlighting resilience in a challenging environment. PNW has also updated its earnings guidance for 2024 to between $5.00 and $5.20 per share, supported by favorable weather, customer growth, and sales momentum, though slightly offset by increased operating expenses.
Analyst Consensus and Future Prospects
For the fiscal year ending in December, analysts project a 13.4% growth in EPS to $5 (diluted). Notably, PNW has a strong track record of exceeding earnings expectations, beating consensus estimates in the last four quarters. Among 14 analysts covering PNW, there is a consensus rating of “Moderate Buy,” comprising six “Strong Buy” ratings and eight “Holds.”
This consensus is somewhat more cautious than a month ago, when seven analysts had rated it as a “Strong Buy.”
Market Adjustments Ahead
On November 22, Morgan Stanley’s (MS) David Arcaro adjusted Pinnacle West’s price target to $81 from $82, reflecting concerns about underperformance in the utilities sector and regulatory challenges in California.
The average price target for PNW stands at $92.92, representing a premium for the stock. The highest price target of $105 indicates a potential upside of 13% from current levels.
On the date of publication, Rashmi Kumari did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are intended solely for informational purposes. For further details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
