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Pinnacle West (PNW) Rides on Investments & Renewable Portfolio

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Pinnacle West Capital Corporation (PNW - Free Report) is involved in the generation, transmission and distribution of electricity from coal, nuclear, gas, oil and solar. The company’s ongoing capital investments to clean its generation portfolio, fortify infrastructure and increase production will likely boost its performance.

However, this Zacks Rank #3 (Hold) company faces risks related to strict regulations and unfavorable weather conditions.

Tailwinds

PNW has been expanding its operations through strategic acquisitions. It has a capital plan of $6 billion for 2024-2026. The company expects transmission investments of nearly $1.2 billion during the same period.

The ongoing investment and planned future investment should assist the company in cleaning its systems and making its services affordable and reliable to its customers. PNW continues to focus on enhancing its renewable capacity. During 2024-2026, the company expects to invest nearly $2.2 billion to boost clean power generation.

The company’s Metro Phoenix service region continues to witness solid growth in commercial activities. It expects new investments and the establishment of businesses to increase demand for its services. PNW expects the development of new data centers in the region to create demand for 640 megawatts of electricity by 2035.

Headwinds

The company, along with its subsidiaries, is subject to numerous environmental laws and regulations and changes, or liabilities under, existing or new laws and 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.

Demand for electricity in the service territories historically peaks during the summer and winter months. Mild weather conditions are likely to result in lower power sales, which may lead to decreased revenues, earnings and cash flow.

Price Performance

Shares of PNW have risen 11.5% in the past three months compared with the industry’s 1% growth.

 

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the industry are Exelon Corporation (EXC - Free Report) , The AES Corporation (AES - Free Report) and NiSource Inc. (NI - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.


Exelon’s long-term (three to five years) earnings growth rate is 5.66%. It delivered an average earnings surprise of 4.5% in the trailing four quarters.

AES delivered an average earnings surprise of 19.2% in the trailing four quarters. The Zacks Consensus Estimate for 2024 earnings indicates year-over-year growth of 9.1%.

NiSource delivered an average earnings surprise of 20.6% in the past four quarters. The consensus estimate for 2024 earnings indicates year-over-year growth of 7.5%.

 

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