Pinnacle Beats Zacks Estimate

Pinnacle West Capital Corp. (PNW - Analyst Report) reported third quarter on-going earnings per share of $1.96, surpassing the Zacks Consensus Estimate of $1.73 and the year-ago on-going earnings of $1.59. Growth can be attributed to higher mark-to-market valuations of fuel contracts due to favorable commodity prices, higher tariffs to retail customers, lower operational and maintenance charges due to higher operating efficiency, and warmer weather that fueled demand for electricity. 

Growth in on-going earnings per share was partly offset by costs incurred for various infrastructure additions and upgrades to Arizona Public Service Co.’s (APS) distribution and transmission facilities, and a net decline in kilowatt-hour sales. Pinnacle distributes electricity in Arizona, U.S., through APS. The decline in kilowatt-hour sales was primarily due to lower consumption by commercial and industrial customers as a result of the current economic turbulence. Retail customers also registered a decline in electricity consumption. 

Excluding the weather factor, consumption by business and retail customers declined 2.5% and 1.4% year-over-year, respectively. However, the average number of residential and business customers increased 0.5% and 0.8% year-over-year, respectively. 

Total revenues in the reported quarter increased 6.8% year over year to roughly $1.1 billion. Operating margin increased 430 basis points (bps) year over year to 30.1%. 

Pinnacle reaffirmed its fiscal 2009 and 2010 on-going earnings per share. It expects fiscal 2009 and 2010 on-going earnings per share to be $2.30 and $3.00, respectively.

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