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PNW

Pinnacle West Capital NYSE:PNW Stock Report

Last Price

US$64.51

Market Cap

US$7.3b

7D

-9.5%

1Y

-10.6%

Updated

01 Oct, 2022

Data

Company Financials +
PNW fundamental analysis
Snowflake Score
Valuation5/6
Future Growth1/6
Past Performance2/6
Financial Health1/6
Dividends5/6

PNW Stock Overview

Pinnacle West Capital Corporation, through its subsidiary, Arizona Public Service Company, provides retail and wholesale electric services primarily in the state of Arizona.

Pinnacle West Capital Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Pinnacle West Capital
Historical stock prices
Current Share PriceUS$64.51
52 Week HighUS$80.51
52 Week LowUS$62.78
Beta0.31
1 Month Change-15.05%
3 Month Change-13.62%
1 Year Change-10.55%
3 Year Change-33.65%
5 Year Change-24.40%
Change since IPO460.96%

Recent News & Updates

Aug 15

Pinnacle West - From Cheap To Overvalued Again

When I last covered the AZ-based utility Pinnacle West, I went with a "HOLD" due to what I viewed as an overvalued price. Since then, we've seen a massive dip, as well as a relatively quick recovery to very similar levels to my last article. This just goes to show you - you invest cheaply and enjoy excellent RoR when the company reverts. Dear Readers, When I last wrote about Pinnacle West Capital Corporation (PNW), I viewed the company as overvalued. This was due to overall muted earnings by the company. I still own a solid stake in the company - and it continues to go up and down here, with my current stake at about 2% TPV. We've been through why the company is currently trading down. It's all about the rate case changes and corresponding decline that we've seen - though we've also seen a fair bit of recovery since then. Since my last article, the company has basically done a +/- 0% - or very close to it. Seeking Alpha PNW Article (Seeking Alpha PNW Article) Let's look at where things are today. Pinnacle West - an Update So, as I said in my last article - the fundamentals of pinnacle west haven't really changed insofar as the company goes. What has changed are the prospects for the rate case. However, despite these issues, the company's operating geography remains one of the fastest-growing states in the nation, which translates into very strong consumer trends and a continued EPS growth target of 5-7% because of a 1.5-2.5% retail customer growth per year - despite the negative rate case. The company also remains at BBB+ - the recent rate issues haven't changed that. And even if all of the expected rate headwinds materialize, the company's payout ratio and 4.2+% yield at the current price, remain as safe as clear spring water, based on the company's forecasted 2022-2024E EPS. I do not consider it likely in any way, that the company will be facing any issues that warrant a dividend cut. My M.O remains to buy this company at a very cheap valuation - which is why I bought some shares when the company dropped well below $70/share not that long ago. That also means though, that the case today isn't necessarily as positive as we've seen in the past. The rate case issues, as I wrote in my last piece, actually simplify the thesis for PNW. Why? Because it really does cap the potential upside, we can get from this investment for the coming few years. The combination of the company-forecasted required capital investments, combined with PNW's clear statement that it won't be tapping equity as a funding source until the end of the next (not this recent) rate case, means that the business needs to fund these costs from operational cash flow and debt either from holding or PNW itself. The latest results we have are the 2Q22. For this quarter, we're really starting to see some of the impacts from the rate case - but despite this, the company isn't really trading down. The EPS is down to $1.45/share, impacted in part by a base rate impact of around a quarter of a dollar or so. Guidance for the year remains at $3.9-$4.1, which more than covers the company dividend, and the EPS growth guidance is very much intact. PNW IR (PNW IR) Meanwhile, the company's current capital deployment plan guides for around $1.5B per year, or $4.7B until 2024E. This is a mix of clean generation, transmission investments, distribution investments (above all), and other investments. This is crucial both in order to harden the distribution infrastructure as well as support Arizona's population growth. The latest rate case was a bit of a horror show. The company hopes that the next few rate cases will have a more positive outcome for the company, allowing for a higher RoE. PNW IR (PNW IR) One of the main worries investors may have until the next rate case is whether the company is going to dilute current shareholders given the investment plans. The company is assuaging fears here and is clear in the communication that there are no plans to issue any equity whatsoever. Instead, investments will be funded with operational cash flow, APS debt, PNW debt, and equity alternatives, fulfilling the $4.7B in capital requirements. The rate case also hasn't impacted the maturity schedule. No significant maturities for the next 2-3 years, with most of the debt after 2028. This company isn't in any fundamental danger and remains a safe sort of utility investment. Pinnacle West is a good example of why utilities are indeed stable investments that warrant your money if you're looking for conservative cash flows. Despite the heavy impact of the rate case, PNW has recovered nicely. PNW's plan to support its growth, reliability and ESG transition is on track. A few planned outages will impact the company during 2022. Arizona and PNW usually face only marginal impacts from weather effects, and this was true for 1Q22, which saw only a $1M variance from normal in quarterly impact. I want forecastability from my utilities, and PNW, despite everything, gives me just that. So, with little changes in the fundamentals, and the valuation going up and down, let's see how the company's forecast has changed. Pinnacle West Valuation The issue with PNW's valuation is, unsurprisingly, the impact from the rate case. The current forecast calls for a mid-point sort of EPS forecast of $4/share, which is a 26% YoY EPS decline. This means that we really want to make sure we buy this company cheap. This is no longer the case at a price of $77.3/share. That'd be a good price, or a decent one, if the company had received a favorable outcome, which the company did not. Beyond 2022, the current forecasts go in-line with the company's own expectations, making that an EPS growth per year of 5-7% or so. What this strictly means is, even at a premium upside of 18x P/E, the upside is no higher than 7.5% per year - at most. I wouldn't go any higher than this. At trough valuation less than 2 months ago, that upside was above 12% per year, which is much more digestible to me. At this valuation...not so much. PNW Upside (F.A.S.T Graphs) In terms of the rate case specifics, 2022 is expected to be the heaviest impact of all. The current forecast lies at the midpoint of the company's own guidance, with 15 analysts forecasting a $4/share average. Not exactly a positive YoY development. So you can see why there are now reasons to be far less excited for the company's prospects. Because what makes utilities such great investments is working clearly against PNW - the forecastability of its earnings and cash flows. I'm at a fairly high degree of certainty that PNW's earnings won't be materially better than what's being forecasted here. I love investing in utilities - but my current focus based on valuation isn't PNW, but Finnish Fortum (OTCPK:FOJCF). Still, 2 months ago, my utility of choice was PNW. It's all about buying these companies at the right valuation - namely, a cheap valuation. However, some of the advantages of a utility remain here. Take forecast accuracy for one. Historical forecast accuracy with a 10% MoE is 100%. 100%. The company doesn't beat forecasts, it doesn't fail them, they're very clear in what happens. Other utilities are very similar. Yields and dividends are typically very stable.

Aug 14
Is Pinnacle West Capital (NYSE:PNW) Using Too Much Debt?

Is Pinnacle West Capital (NYSE:PNW) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that...

Aug 02

Pinnacle West Capital Q2 2022 Earnings Preview

Pinnacle West Capital (NYSE:PNW) is scheduled to announce Q2 earnings results on Wednesday, August 3rd, before market open. The consensus EPS Estimate is $1.31 (-31.4% Y/Y) and the consensus Revenue Estimate is $974.6M (-2.5% Y/Y). Over the last 1 year, PNW has beaten EPS estimates 75% of the time and has beaten revenue estimates 100% of the time. Over the last 3 months, EPS estimates have seen 1 upward revision and 5 downward. Revenue estimates have seen 3 upward revisions and 0 downward.

Jul 28
Pinnacle West Capital (NYSE:PNW) Is Reinvesting At Lower Rates Of Return

Pinnacle West Capital (NYSE:PNW) Is Reinvesting At Lower Rates Of Return

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an...

Shareholder Returns

PNWUS Electric UtilitiesUS Market
7D-9.5%-8.1%-2.5%
1Y-10.6%-1.3%-23.2%

Return vs Industry: PNW underperformed the US Electric Utilities industry which returned -1.3% over the past year.

Return vs Market: PNW exceeded the US Market which returned -23.2% over the past year.

Price Volatility

Is PNW's price volatile compared to industry and market?
PNW volatility
PNW Average Weekly Movement3.1%
Electric Utilities Industry Average Movement3.3%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: PNW is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: PNW's weekly volatility (3%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19855,872Jeff Guldnerhttps://www.pinnaclewest.com

Pinnacle West Capital Corporation, through its subsidiary, Arizona Public Service Company, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include approximately 5,814 pole miles of overhead lines and approximately 74 miles of underground lines; and distribution facilities comprise approximately 11,258 miles of overhead lines and approximately 22,821 miles of underground primary cable, as well as owns and maintains 475 transmission and distribution substations.

Pinnacle West Capital Fundamentals Summary

How do Pinnacle West Capital's earnings and revenue compare to its market cap?
PNW fundamental statistics
Market CapUS$7.29b
Earnings (TTM)US$548.65m
Revenue (TTM)US$3.95b

13.3x

P/E Ratio

1.8x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
PNW income statement (TTM)
RevenueUS$3.95b
Cost of RevenueUS$2.26b
Gross ProfitUS$1.69b
Other ExpensesUS$1.14b
EarningsUS$548.65m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)4.85
Gross Margin42.82%
Net Profit Margin13.88%
Debt/Equity Ratio129.2%

How did PNW perform over the long term?

See historical performance and comparison

Dividends

5.3%

Current Dividend Yield

70%

Payout Ratio
We’ve recently updated our valuation analysis.

Valuation

Is PNW undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for PNW?

Other financial metrics that can be useful for relative valuation.

PNW key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue4x
Enterprise Value/EBITDA9.8x
PEG Ratio2.4x

Price to Earnings Ratio vs Peers

How does PNW's PE Ratio compare to its peers?

PNW PE Ratio vs Peers
The above table shows the PE ratio for PNW vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average15.4x
OGE OGE Energy
7.9x-6.1%US$7.3b
IDA IDACORP
20.8x4.1%US$5.0b
LNT Alliant Energy
19.1x6.3%US$13.3b
EVRG Evergy
16.6x5.5%US$13.6b
PNW Pinnacle West Capital
13.3x5.5%US$7.3b

Price-To-Earnings vs Peers: PNW is good value based on its Price-To-Earnings Ratio (13.3x) compared to the peer average (15.4x).


Price to Earnings Ratio vs Industry

How does PNW's PE Ratio compare vs other companies in the US Electric Utilities Industry?

Price-To-Earnings vs Industry: PNW is good value based on its Price-To-Earnings Ratio (13.3x) compared to the US Electric Utilities industry average (17.8x)


Price to Earnings Ratio vs Fair Ratio

What is PNW's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

PNW PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio13.3x
Fair PE Ratio21.2x

Price-To-Earnings vs Fair Ratio: PNW is good value based on its Price-To-Earnings Ratio (13.3x) compared to the estimated Fair Price-To-Earnings Ratio (21.2x).


Share Price vs Fair Value

What is the Fair Price of PNW when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: PNW ($64.51) is trading below our estimate of fair value ($260.3)

Significantly Below Fair Value: PNW is trading below fair value by more than 20%.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.


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Future Growth

How is Pinnacle West Capital forecast to perform in the next 1 to 3 years based on estimates from 10 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


5.5%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: PNW's forecast earnings growth (5.5% per year) is above the savings rate (1.9%).

Earnings vs Market: PNW's earnings (5.5% per year) are forecast to grow slower than the US market (14.8% per year).

High Growth Earnings: PNW's earnings are forecast to grow, but not significantly.

Revenue vs Market: PNW's revenue (3.8% per year) is forecast to grow slower than the US market (7.7% per year).

High Growth Revenue: PNW's revenue (3.8% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: PNW's Return on Equity is forecast to be low in 3 years time (8.4%).


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Past Performance

How has Pinnacle West Capital performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


4.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: PNW has high quality earnings.

Growing Profit Margin: PNW's current net profit margins (13.9%) are lower than last year (15.7%).


Past Earnings Growth Analysis

Earnings Trend: PNW's earnings have grown by 4.4% per year over the past 5 years.

Accelerating Growth: PNW's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: PNW had negative earnings growth (-5.1%) over the past year, making it difficult to compare to the Electric Utilities industry average (10.1%).


Return on Equity

High ROE: PNW's Return on Equity (9.4%) is considered low.


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Financial Health

How is Pinnacle West Capital's financial position?

Financial Health Score

1/6

Financial Health Score 1/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: PNW's short term assets ($1.8B) do not cover its short term liabilities ($2.0B).

Long Term Liabilities: PNW's short term assets ($1.8B) do not cover its long term liabilities ($14.5B).


Debt to Equity History and Analysis

Debt Level: PNW's net debt to equity ratio (128.8%) is considered high.

Reducing Debt: PNW's debt to equity ratio has increased from 97.8% to 129.2% over the past 5 years.

Debt Coverage: PNW's debt is not well covered by operating cash flow (14.6%).

Interest Coverage: PNW's interest payments on its debt are well covered by EBIT (3.4x coverage).


Balance Sheet


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Dividend

What is Pinnacle West Capital current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


5.27%

Current Dividend Yield

Dividend Yield vs Market

Pinnacle West Capital Dividend Yield vs Market
How does Pinnacle West Capital dividend yield compare to the market?
SegmentDividend Yield
Company (Pinnacle West Capital)5.3%
Market Bottom 25% (US)1.7%
Market Top 25% (US)4.7%
Industry Average (Electric Utilities)3.3%
Analyst forecast in 3 Years (Pinnacle West Capital)5.5%

Notable Dividend: PNW's dividend (5.27%) is higher than the bottom 25% of dividend payers in the US market (1.67%).

High Dividend: PNW's dividend (5.27%) is in the top 25% of dividend payers in the US market (4.73%)


Stability and Growth of Payments

Stable Dividend: PNW's dividends per share have been stable in the past 10 years.

Growing Dividend: PNW's dividend payments have increased over the past 10 years.


Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (69.6%), PNW's dividend payments are covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: PNW is paying a dividend but the company has no free cash flows.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

1.8yrs

Average management tenure


CEO

Jeff Guldner (56 yo)

3.08yrs

Tenure

US$8,100,157

Compensation

Mr. Jeffrey B. Guldner, also known as Jeff, has been Chairman and Chief Executive Officer of Arizona Public Service Company since November 15, 2019 and served as its President since August 13, 2021 until M...


CEO Compensation Analysis

Jeff Guldner's Compensation vs Pinnacle West Capital Earnings
How has Jeff Guldner's remuneration changed compared to Pinnacle West Capital's earnings?
DateTotal Comp.SalaryCompany Earnings
Jun 30 2022n/an/a

US$549m

Mar 31 2022n/an/a

US$600m

Dec 31 2021US$8mUS$1m

US$619m

Sep 30 2021n/an/a

US$572m

Jun 30 2021n/an/a

US$578m

Mar 31 2021n/an/a

US$556m

Dec 31 2020US$7mUS$1m

US$551m

Sep 30 2020n/an/a

US$634m

Jun 30 2020n/an/a

US$600m

Mar 31 2020n/an/a

US$550m

Dec 31 2019US$4mUS$778k

US$538m

Sep 30 2019n/an/a

US$500m

Jun 30 2019n/an/a

US$503m

Mar 31 2019n/an/a

US$526m

Dec 31 2018US$2mUS$575k

US$511m

Compensation vs Market: Jeff's total compensation ($USD8.10M) is about average for companies of similar size in the US market ($USD8.67M).

Compensation vs Earnings: Jeff's compensation has been consistent with company performance over the past year.


Leadership Team

Experienced Management: PNW's management team is not considered experienced ( 1.8 years average tenure), which suggests a new team.


Board Members

Experienced Board: PNW's board of directors are considered experienced (5.9 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

NYSE:PNW Recent Insider Transactions by Companies or Individuals
DateValueNameEntityRoleSharesMax Price
17 May 22SellUS$259,058Barbara LockwoodIndividual3,489US$74.25
09 Nov 21SellUS$212,130James HatfieldIndividual3,327US$63.76

Ownership Breakdown

What is the ownership structure of PNW?
Owner TypeNumber of SharesOwnership Percentage
State or Government47,7530.04%
Individual Insiders297,7530.3%
General Public13,378,04711.8%
Institutions99,320,06987.9%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Top 25 shareholders own 70.01% of the company
OwnershipNameSharesCurrent ValueChange %Portfolio %
12.15%
The Vanguard Group, Inc.
13,731,064$885.8m2.95%0.02%
9.03%
Lazard Asset Management LLC
10,202,529$658.2m3.68%0.7%
8.64%
BlackRock, Inc.
9,763,046$629.8m4.08%0.02%
6.69%
State Street Global Advisors, Inc.
7,560,458$487.7m9.39%0.03%
5.02%
Barrow, Hanley, Mewhinney & Strauss, LLC
5,676,614$366.2m-0.17%1.45%
3.29%
American Century Investment Management Inc
3,717,224$239.8m2.57%0.19%
3.15%
Invesco Capital Management LLC
3,566,497$230.1m12.53%0.19%
2.48%
Franklin Resources, Inc.
2,799,376$180.6m-13.22%0.08%
2.35%
Massachusetts Financial Services Company
2,661,071$171.7m-6.34%0.05%
2.3%
Geode Capital Management, LLC
2,596,575$167.5m3.26%0.02%
1.95%
First Sentier Investors (Australia) IM Ltd
2,205,415$142.3m-2.89%0.35%
1.92%
Wellington Management Group LLP
2,170,302$140.0m-1.97%0.03%
1.16%
First Trust Advisors LP
1,313,163$84.7m14.54%0.1%
1.04%
Norges Bank Investment Management
1,170,916$75.5m0%0.01%
0.98%
Envestnet Asset Management, Inc.
1,109,566$71.6m823.52%0.04%
0.95%
Legal & General Investment Management Limited
1,077,585$69.5m-8.09%0.02%
0.93%
Cincinnati Financial Corp., Asset Management Arm
1,046,858$67.5m0%0.85%
0.92%
BNY Mellon Asset Management
1,034,385$66.7m5.09%0.02%
0.85%
Northern Trust Global Investments
958,824$61.9m-0.5%0.01%
0.8%
Charles Schwab Investment Management, Inc.
906,616$58.5m1.93%0.02%
0.72%
Duff & Phelps Investment Management Co.
810,450$52.3m-13.42%0.63%
0.71%
Personal Capital Advisors Corporation
800,004$51.6m3.44%0.3%
0.7%
Eaton Vance Management
795,117$51.3m2.33%0.02%
0.69%
Newport Trust Company, Asset Management Arm
781,346$50.4m-2.13%0.31%
0.61%
J.P. Morgan Asset Management, Inc.
688,007$44.4m-3.88%0.01%

Company Information

Pinnacle West Capital Corporation's employee growth, exchange listings and data sources


Key Information

  • Name: Pinnacle West Capital Corporation
  • Ticker: PNW
  • Exchange: NYSE
  • Founded: 1985
  • Industry: Electric Utilities
  • Sector: Utilities
  • Implied Market Cap: US$7.292b
  • Shares outstanding: 113.04m
  • Website: https://www.pinnaclewest.com

Number of Employees


Location

  • Pinnacle West Capital Corporation
  • 400 North Fifth Street
  • PO Box 53999
  • Phoenix
  • Arizona
  • 85072-3999
  • United States


Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
PNWNYSE (New York Stock Exchange)YesCommon StockUSUSDJan 1968
PWCDB (Deutsche Boerse AG)YesCommon StockDEEURJan 1968
PWCXTRA (XETRA Trading Platform)YesCommon StockDEEURJan 1968
0KITLSE (London Stock Exchange)YesCommon StockGBUSDJan 1968
P1NW34BOVESPA (Bolsa de Valores de Sao Paulo)BDR EACH 2 REPR 1 COMBRBRLJan 2020

Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/10/01 00:00
End of Day Share Price2022/09/30 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.