Pinnacle West Benefits From Investments & Expanding Customer Base

Pinnacle West Capital Corporation’s PNW ongoing capital investment is expected to clean its generation portfolio, fortify infrastructure and allow it to meet the demands of an expanding customer base. Cost-saving initiatives are expected to boost the company’s bottom line. 

However, this currently Zacks Rank #3 (Hold) company faces risks related to fluctuations in commodity prices and strict regulations.

Factors Acting in Favor of PNW

Pinnacle West’s Metro Phoenix service region continues to witness solid growth in commercial activities. Improved economic conditions in Arizona have resulted in an expanding customer base. In 2024, PNW installed over 32,000 new residential meters, marking its highest annual total since the Great Recession.

The company projects long-term retail customer growth of 1.5-2.5% and weather-normalized retail electricity sales growth of 4-6%. PNW’s ongoing and planned future investments should help keep its systems clean, its services affordable and reliable, and its programs innovative to better assist customers. It has a capital investment plan of $7.6 billion for 2025-2027.

PNW sticks to its goal of decreasing operating and maintenance expenses (O&M) per megawatt-hour. It expects 2025 adjusted core O&M expenses to be in the $910-$920 million range compared with $955 million in 2024. This indicates a year-over-year reduction in core expenses. In addition to striving for cost reductions, the company is using modern technologies to provide high-quality services that will help keep customer rates low. This should further contribute to Pinnacle West’s top-line growth.

Challenges Faced by PNW

Pinnacle West’s operations are exposed to fluctuations in commodity prices and transportation costs of electricity and natural gas. Potential volatility in market prices of fuel, electricity and other renewable energy commodities could create operational risks for the company.

PNW, along with its subsidiaries, is subject to numerous environmental laws and regulations and changes in, or liabilities under, existing or new laws or regulations. The cost of complying with new regulations could increase the cost of operations, while failure to meet the same might adversely impact its business.

PNW’s Share Price Performance

In the past three months, shares of the company have lost 2.1% against the industry’s 0.1% growth.

Stocks to Consider

Some better-ranked stocks from the same industry are TransAlta TAC, sporting a Zacks Rank #1 (Strong Buy), and NiSource NI and Fortis FTS, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TAC’s 2025 earnings per share (EPS) is pinned at 8 cents, indicating a year-over-year decline of 81.4%. The Zacks Consensus Estimate for 2025 sales is pinned at $2 billion, indicating a year-over-year decline of 4%.

NiSource’s long-term (three to five years) earnings growth rate is 7.88%. The Zacks Consensus Estimate for NI’s 2025 EPS implies an improvement of 7.4% from that recorded in 2024.

FTS’ long-term earnings growth rate is 5.13%. The company delivered an average earnings surprise of 4.5% in the last four quarters.

 

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This article originally published on Zacks Investment Research (zacks.com).

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