Pinnacle West (PNW) Rides on Investments, Clean Power Generation
Pinnacle West Capital Corporation’s PNW ongoing investments in generation, transmission and distribution lines will help serve customers efficiently. Development activities in PNW’s service territories will improve the company’s overall performance.
However, this Zacks Rank #3 (Hold) company has to face risks related to any unplanned outages in its nuclear generation facilities.
Tailwinds
Pinnacle West has a capital investment plan of $5.45 billion for 2023-2025, at an average annual growth rate of 5-7%. PNW expects transmission investments of $315 million for 2023, up nearly 45% from the year-ago level. The company projects long-term retail customer growth of 1.5-2.5% and weather-normalized retail electricity sales growth of 4.5-6.5%.
PNW anticipates new investments and establishment of businesses to increase demand for its services. Taiwan Semiconductor has increased its investment from $12 billion to $40 billion for the new projects. These projects, when fully constructed, will create a working space of nearly 3 million square feet and generate demand for electricity.
The company is using new technology to provide high-quality services to customers. It is also working toward obtaining cost savings, which will help keep customer rates low.
Pinnacle West continues to focus on enhancing its renewable capacity. During 2023-2025, the company is expected to invest nearly $1.31 billion in boosting clean power generation. The company will develop 1,600 megawatts of clean energy and storage that are expected to be placed in service by 2024 for Arizona Public Service Company customers.
Headwinds
Potential volatility in market prices of fuel, electricity and other renewable energy commodities could create operational risks for the company. Pinnacle West has nuclear generation facilities that need to undergo thorough safety, security and other licensing requirements. The company will be affected by any unplanned outage in nuclear plants, stemming from safety concerns and unexpected production stoppage.
Moreover, if planned maintenance outages of the nuclear units continue longer than expected, it will adversely impact production and operations.
Stocks to Consider
Some better-ranked stocks from the same industry are Consolidated Edison ED, NiSource Inc. NI and Entergy Corp. ETR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidated Edison’s long-term (three-to-five-year) earnings growth rate is 2%. The Zacks Consensus Estimate for ED’s 2023 EPS indicates an increase of 9% from the previous year’s reported number.
NiSource’s long-term earnings growth rate is 7.15%. The Zacks Consensus Estimate for NI’s 2023 EPS implies an improvement of 8.8% from that recorded in 2022.
Entergy’s long-term earnings growth rate is 6.43%. It delivered an average earnings surprise of 4.4% for the previous four quarters.
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