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Here's Why You Should Hold on to Pinnacle West (PNW) Stock

Zacks Equity Research

Pinnacle West Capital Corporation PNW has been a consistent performer, courtesy of continuous investments in traditional generation, transmission & distribution lines. Strengthening and expansion of operation is helping the company effectively serve an expanding customer base.

Pinnacle West’s subsidiary, Arizona Public Service (“APS”), is witnessing a gradual economic recovery fueled by the rapidly developing Phoenix Metropolitan Area. The company expects annual customer growth in the range of 2-3% during the 2017-2019 period.  APS’s customer base is expected to increase 1.5-2.5% in 2017 and also registered a 1.9% rise in customers during the third quarter.

Pinnacle West projects capital expenditure of $1,337 million, $1,181 million and $1,009 million in 2017, 2018 and 2019, respectively. The company plans to invest heavily in infrastructure upgrades to serve an expanding customer base.

The company carries investment grade ratings of A3 and A- by Moody’s and S&P, respectively. The company needs to access the capital market to secure funds for ongoing development projects . A higher rating denotes higher credit worthiness, thereby ensuring access to cheap financing options.

The company reported positive earnings surprise in three out of the last four quarters, with an average positive earnings of 17.49%. In last 60 days, the Zacks Consensus Estimate for the company’s 2017 earnings per share inched up 0.5%. The Zacks Consensus Estimate for 2017 total revenues improved 3.14% year over year.

All these factors had a positive impact on the price performance of the company. Shares of the company have returned 18.4% in the last 12 months, outperforming the Zacks Electric Power industry’s rally of 13.3%.


The company’s operations are dependent on regulatory authorities for the timely recovery of investments through rate relief. The company will be affected by unplanned outage in nuclear plants stemming from safety reasons and unexpected production stoppage.

Zacks Rank & Key Picks

Pinnacle West Capital currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same industry are PNM Resources, Inc. PNM, IDACORP Inc. IDA and UNITIL Corporation UTL . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PNM Resources reported third-quarter 2017 earnings from continuing operations of 93 cents per share, beating the Zacks Consensus Estimate of 85 cents by 9.4%. Its 2017 estimates improved 0.5% to $1.86 from $1.85 per share in the last 30 days.

IDACORP reported third-quarter 2017 earnings from continuing operations of $1.80, beating the Zacks Consensus Estimate of $1.66 cents by 8.4%. Its 2017 estimates increased 2% to $4.08 from $4.00 in the last 30 days.

UNITIL posted third-quarter 2017 earnings from continuing operations of 16 cents, beating the Zacks Consensus Estimate of 11 cents by 45.5%. Its 2017 estimates increased by 2.5% to $2.03 from $1.98 per share in the last 60 days.

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