On Thursday, Pinnacle West Capital (NYSE:PNW) received an upgrade from Neutral to Buy by Ladenburg Thalmann, accompanied by a new price target of $83.50. The firm's decision is based on the anticipated earnings per share (EPS) benefit for Pinnacle West's subsidiary, Arizona Public Service Co. (APS), following the potential approval of a regulatory docket by the Arizona Corporation Commission (ACC).
The analyst from Ladenburg Thalmann cited the ACC Modification of Test Year Rules docket as the catalyst for the upgrade. This docket is expected to be discussed in an open meeting on June 11, 2024, where the commission will schedule a workshop aimed at addressing regulatory lag and fostering a more supportive regulatory environment in Arizona.
According to the analyst's updated model, APS has been projected to under-earn through 2027, achieving their authorized return only by 2028 if the timing of the docket aligns with expectations. The proposed changes are anticipated to allow for the use of forward test years, which could significantly reduce the time it takes for utility rates to reflect the costs and investments made by the utility company.
The ACC's forthcoming actions have the potential to reshape the financial landscape for APS and, by extension, Pinnacle West. The outcome of the June 11th meeting and subsequent workshop could therefore be pivotal in determining the company's financial trajectory over the coming years.
In other recent news, Pinnacle West Capital has seen noteworthy developments. The company's Q1 2024 earnings came in at $0.15 per share, a significant improvement from a loss of $0.03 per share in the same quarter of the previous year. This performance exceeded both BofA Securities and consensus estimates, which led BofA Securities to revise its 2024 earnings per share estimate for the company upward to $4.84 from $4.82.
Further, Wells Fargo maintained an Equal Weight rating on Pinnacle West Capital while raising the price target from $77.00 to $80.00, citing positive regulatory developments. In addition, the company announced its plan to offer $450 million in convertible senior notes due in 2027, with proceeds earmarked for general corporate purposes including potential debt repayment and investments in its subsidiary, Arizona Public Service Company.
Pinnacle West also reaffirmed its 2024 EPS guidance range of $4.60 to $4.80 per share and reiterated its commitment to a long-term EPS growth target of 5%-7%. The company is exploring debt markets and low-cost financing options, including the Department of Energy lending program. These are among the recent developments for Pinnacle West Capital Corp (NYSE:PNW).
InvestingPro Insights
As Pinnacle West Capital (NYSE:PNW) garners attention with its recent upgrade from Ladenburg Thalmann, investors may find additional context through key metrics and insights. With a market capitalization of $8.76 billion and a P/E ratio of 16.79, the company stands out in the utility sector. Notably, Pinnacle West has demonstrated a commitment to shareholder returns, raising its dividend for 12 consecutive years, and maintaining payments for 32 years, a testament to its financial stability. This is particularly relevant given the analyst's positive outlook on the company's subsidiary, APS, and the potential regulatory developments.
InvestingPro data indicates a dividend yield of 4.56%, which could be attractive for income-focused investors, especially in the context of the recent analyst upgrade. Additionally, the company's revenue growth over the last twelve months was 4.84%, suggesting a steady financial performance. Despite concerns over the company's significant debt burden and short-term obligations exceeding liquid assets, analysts predict profitability for the current year. For those considering deeper analysis, there are additional InvestingPro Tips available, providing insights into aspects like earnings revisions and the company's trading volatility. Interested readers can access these additional tips and make more informed decisions by using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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