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Why Is Pinnacle West (PNW) Down 10.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Pinnacle West (PNW - Free Report) . Shares have lost about 10.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pinnacle West due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Pinnacle West Q2 Earnings and Revenues Beat Estimates

Pinnacle West delivered adjusted earnings per share of $1.71 in the second quarter of 2020, which beat the Zacks Consensus Estimate of $1.48 by 15.6%.

The bottom line also improved from the year-ago quarter’s adjusted earnings of $1.28. The result reflects the impact of hotter-than-normal weather, which boosted demand.

Total Revenues

In the quarter under review, total revenues of $929.6 million improved 6.9% on a year-over-year basis. The top line also surpassed the Zacks Consensus Estimate of $902 million by 3.1%.

Operational Highlights

In the second quarter, total operating expenses were $661.7 million, down 1.7% from the year-ago quarter.

Operating income improved 33.2% year over year to $261.9 million.

Interest expenses were $62.7 million, up 9% year over year.

Financial Highlights

Cash and cash equivalents worth $6.7 million as of Jun 30, 2020 were down from $10.3 million on Dec 31, 2019.

Total long-term debt was $5,922.2 million as of Jun 30, 2020, higher than $4,832.6 million at 2019 end.

Cash flow from operating activities for first-half 2020 was $369 million compared with $345.9 million in the comparable year-ago period. For the first six months of 2020, capital expenditure of the company was $676.9 million compared with $541.4 million in the corresponding quarter of last year.

Guidance

Management reaffirmed 2020 EPS in the range of $4.75-$4.95, the midpoint of which is $4.85, higher than the current Zacks Consensus Estimate of $4.83.

The company is going to invest $4.7 billion in Arizona Public Service Company (APS) over the 2020-2022 time period. Pinnacle West Capital expects retail customer growth of 1.5-2% annually over the same time frame.
 

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months.

VGM Scores

Currently, Pinnacle West has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Pinnacle West has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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