On Jun 18, we have issued an updated research report on
Pinnacle West Capital Corp.
). The utility operator looks well-positioned for 2014 given the
steady improvement in the Arizona economy. Continued customer
additions and falling non-residential vacancy rates signal positive
recovery in the coming years which will bode well for Pinnacle
West's future growth.
However, weather variations might pose challenges for the company's
sales. Unfavorable weather lowered Pinnacle West's earnings per
share by 8 cents in the first quarter of 2014. In addition, market
price volatilities might further act as headwinds.
Pinnacle West, a Zacks Rank #3 (Hold) stock, posted mixed financial
results in the first quarter with earnings marginally beating the
Zacks Consensus Estimate. Revenue, on the other hand, fell short of
the Zacks Consensus Estimate. On a year-over-year basis, both top
and bottom line declined owing to lower transmission revenues and
drop in electricity sales volume.
Meanwhile, Pinnacle West is driving up investments to expand its
generation, transmission and distribution operations. For 2014,
Pinnacle West intends to invest $973 million. In 2015 and 2016, the
company intends to increase capital spending to $1.1 billion and
$1.3 billion, respectively. This infrastructure-investment strategy
will lend substantial upside to the company's future momentum.
In addition, the solar industry will witness the fastest growth in
the long term thanks to the Obama Climate Plan. Solar power
generation will account for 7.5% of total electricity generation
from all non-hydro renewable energy sources in 2040 as per the
Energy Information Administration.
Pinnacle West's Arizona Sun program will stand to benefit from the
encouraging opportunities in the utility-scale solar market. Also,
it will help the company to achieve the targeted renewable energy
standard of 15% of retail electric sales from the renewable sources
Nonetheless, coal as of now still dominates Pinnacle West's
generation mix and is subject to strict pro-environment
legislations. The company could face the brunt of cost pressure
given the recent plan announced by the Obama administration that
calls for the reduction in carbon emissions by 30% by 2030 from the
Key Picks from the Sector
Other better-ranked utility players include
NRG Energy Inc.
Black Hills Corp.
). All the stocks currently carry a Zacks Rank #1 (Strong Buy).
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PINNACLE WEST (PNW): Free Stock Analysis Report
ENTERGY CORP (ETR): Free Stock Analysis Report
BLACK HILLS COR (BKH): Free Stock Analysis
NRG ENERGY INC (NRG): Free Stock Analysis
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