Pinnacle West Q2 Earnings Beat on Lower Costs, Revenues Miss

Zacks

Pinnacle West Capital Corp. (PNW) reported adjusted earnings per share of $1.19, outpacing the Zacks Consensus Estimate by 4.4%. Earnings were a penny higher than the year-ago quarter.

Continued solid operational performance coupled with effective cost containment aided the upside.
 

 

Total Revenue

Quarterly revenues were $906.3 million, down 1% from the year-earlier period. Revenues also fell short of the Zacks Consensus Estimate by 3.9%. The revenue downturn was due to lower retail electricity sales, lower transmission revenue and a less warm weather compared to the year-ago quarter.  

Operational Highlights

Total regulated electricity delivered in the quarter fell 0.4% to 8,020 Gigawatt-hours (GWh) from 8,055 GWh in the year-ago quarter.

Retail electricity sales decreased 3% to 7,001 GWh from 7,221 GWh a year ago. The decline was due to lower electricity consumption by business as well as residential customers.

On the cost side, fuel and purchased power costs increased 4.7% to $290.9 million from the year-ago quarter. The company’s operations and maintenance expenses however decreased 7.7% year over year to $211.2 million due to a decline in employee benefit costs.

Operating income decreased 2.2% year over year to $254.1 million in the second quarter. Though expenses declined, a lower magnitude of revenue increase ate into profitability.

Financial Condition

As of Jun 30, 2014, Pinnacle West’s cash and cash equivalents were $9.2 million versus $9.5 million as of Dec 31, 2013.

Long-term debt as of Jun 30, 2014, was $3.0 billion compared with $2.8 billion as of Dec 31, 2013.

Pinnacle West generated $465 million in cash from operations during the first half of 2014, up 2.4% year over year.

Capital expenditure increased 3.2% year over year to $388 million.

Guidance

Pinnacle West estimates earnings for 2014 in the band $3.60–$3.75 per share. Retail customer growth is anticipated at about 2.5%. Operating expenses are expected in the range of $790 million to $810 million.

Other Utility Company Releases

Xcel Energy Inc. (XEL) posted earnings per share of 42 cents, beating the Zacks Consensus Estimate by a penny.

TECO Energy Inc. (TE) reported second quarter 2014 earnings of 28 cents per share, edging past the Zacks Consensus Estimate of 27 cents.

NextEra Energy Inc. (NEE) reported pro forma earnings of $1.43 per share, missing the Zacks Consensus Estimate by 1.4%.

Zacks Rank

Pinnacle West presently carries a Zacks Rank #2 (Buy).

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