Mizuho reaffirmed its positive stance on Pinnacle West Capital (NYSE:PNW), maintaining an Outperform rating and a price target of $75.00. The firm's endorsement follows recent investor meetings in Houston with Pinnacle West's CEO Jeffrey Guldner and CFO Andrew Cooper.
The discussions revealed that the company is optimistic about a favorable decision by the end of 2024 regarding the regulatory lag docket, which is under review.
Management at Pinnacle West expressed confidence that the political composition of the Arizona Corporation Commission (ACC) would remain stable after the elections in November. This stability is seen as a positive sign for the company's regulatory environment.
Furthermore, the company pointed out that 2024 marks the conclusion of a decade-long pension amortization benefit, which has positively impacted its financial results. The year's earnings will also reflect a one-time gain from the sale of a non-regulated business, contributing $0.35 to the earnings.
According to Mizuho, Pinnacle West's level of capital expenditure indicates that the company is likely to file its next rate case in the second quarter of 2025.
The filing is expected to potentially include a formula rate plan mechanism, the specifics of which will depend on the outcome of the current lag reduction docket. The firm's reiterated price target and rating reflect confidence in the utility company's prospects.
Pinnacle West Capital Corporation (NYSE:PNW) has reported notable growth in its 2024 second quarter earnings call, attributing this positive financial performance to an increased customer base and favorable weather conditions.
Pinnacle West is actively involved in regulatory proceedings, with decisions on a rate case filing pending further developments. The company has completed a significant equity issuance and plans to use an ATM program for future financing needs.
Despite guiding to a lower range of sales growth for the year, Pinnacle West expects no significant headwinds, aside from normal economic factors.
In terms of future expectations, the company has a substantial backlog of customers extending beyond 2026, including TSMC and data center customers representing over 4,000 megawatts. Updates on sales growth and capital plans are expected in the third quarter.
InvestingPro Insights
As Pinnacle West Capital (NYSE:PNW) navigates through its regulatory and financial landscape, real-time data from InvestingPro provides a deeper look into the company's current valuation and performance. With a market capitalization of $10.25 billion and a P/E ratio standing at 16.57, Pinnacle West appears to be trading at a reasonable valuation relative to its near-term earnings growth. This is further illustrated by the adjusted P/E ratio for the last twelve months as of Q2 2024, which is 17.17.
The company's revenue growth of 7.57% over the last twelve months as of Q2 2024, coupled with a quarterly revenue growth of 16.7%, indicates a strong and growing business. The gross profit margin of 41.79% showcases the company's ability to maintain profitability, which is a positive sign for investors.
InvestingPro Tips suggest that Pinnacle West operates with a significant debt burden, yet it has managed to raise its dividend for 12 consecutive years and has maintained dividend payments for 32 consecutive years. The company is also trading near its 52-week high, reflecting a strong return over the last three months, with a price total return of 21.97%. These factors, combined with the analysts' prediction that the company will be profitable this year, make Pinnacle West an interesting prospect for investors.
For those interested in a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/PNW, offering further insights into Pinnacle West's financial health and market performance.
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