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Pinnacle West Capital to Gain From Consistent Investments

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We issued an updated research report on Pinnacle West Capital Corporation (PNW - Free Report) . The company is involved in the generation, transmission as well as distribution of electricity from coal, nuclear, gas, oil and solar.

What’s Driving the Stock?

Pinnacle West operates in Arizona, which is witnessing a gradual economic recovery fueled by the rapidly developing Phoenix Metropolitan Area. The region continues to generate job growth, which is above the national average. This has resulted in demand growth for utility services from commercial and residential sectors. Through August 2018, employment in Metro Phoenix increased 3.1% compared with 1.6% rise in the United States.

Pinnacle West expects to invest heavily in infrastructure upgrades to serve its expanding customer base. The company expects to make capital expenditures of $1,206 million, $1,153 million and $1,211 million for 2018, 2019 and 2020, respectively.

Along with expanding utility infrastructure, the company continues to focus on enhancing renewable capacity.  The company has plans to increase renewable energy from the current levels and invest $458 million in renewable generation in the 2018-2020 period. The company’s subsidiary — Arizona Public Service has reduced carbon emission by 35% since 2005.

Pinnacle West carries investment grade ratings of A3 and A- by Moody’s and S&P, respectively. A higher rating denotes higher credit worthiness, thereby ensuring access to cheap financing options. The solid credit rating will enable the company to secure funds from the market at favorable conditions even with the recent rate hike.

However, comprehensive regulations by federal, state and local regulatory agencies, fluctuations in the commodity price and weather as well as operational hazards may hurt Pinnacle West Capital’s performance.

Performance in Q3

In the third quarter of 2018, the company’s earnings of $2.80 per share beat the Zacks Consensus Estimate of $2.75 by 1.8%. Other companies from the same industry that pulled off a beat this earnings season are NiSource Inc (NI - Free Report) , Ameren Corporation (AEE - Free Report) and FirstEnergy Corp (FE - Free Report) .

Earnings of NiSource, Ameren and FirstEnergy beat the Zacks Consensus Estimate by 66.7%, 17.2% and 9.59% in the third quarter, respectively.

The Zacks Consensus Estimate for 2018 earnings for NiSource, Ameren and FirstEnergy have inched up 1.5%, 0.3% and 0.4% in the past 30days, respectively.

Zacks Rank & Price Movement

Pinnacle West Capital carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Shares of Pinnacle West Capital have gained 12.2% in the past six months compared with the industry’s raise of 4.4%.

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