On Sep 30, we have issued an updated research report on Pinnacle West Capital Corporation (PNW). Systematic investments in infrastructure development projects as well as renewable ventures backed by a stable liquidity position and cash generating capacity, and gradual recovery of Arizona’s economy will likely boost the company’s future performance. However, strict environmental regulations, water scarcity and volatility in commodity prices as well as transportation costs might deter growth.
Pinnacle West’s earnings in the second quarter of 2014 surpassed the Zacks Consensus Estimate and improved year over year, primarily on the back of strong operational performance. The reported top line missed the estimate mainly due to a decline in transmission revenues.
Pinnacle West pursues a systematic capital spending program to strengthen its utility systems and expand its renewable capacity. The company invested around $0.39 billion in the first six months of 2014 and intends to spend a total of roughly $0.93 billion in 2014. Pinnacle West is currently focused on expanding its generation, distribution and transmission portfolio. These initiatives will allow the company to provide reliable services to its customers.
As far as the renewable projects are concerned, Pinnacle West is working on its rooftop solar installation project and the AZ Sun program. In 2014, the company plans to invest $131 million in renewable generation ventures. The scheduled completion of these ventures will allow Pinnacle West to enhance its generation capacity through renewable sources.
Apart from Pinnacle West, its peers like DTE Energy Company (DTE), Exelon Corporation (EXC) and NRG Energy, Inc. (NRG) are investing substantially in renewable ventures to attain regulatory compliance.
Pinnacle West maintains a stable liquidity position. The company had total available liquidity of $1 billion under its unit Arizona Public Service Company’s credit facilities as of Jun 30, 2014 and operating cash flow of roughly $0.47 billion in the first half of 2014. A flexible financial health will allow the company to invest more on its utility systems.
The improvement in the economy of Arizona continues to drive Pinnacle West’s financial performance. Moreover, development in the job market and an increase in single-family as well as multi-family housing permits will likely prevail in the forthcoming quarters, which will subsequently boost utility consumption and improve future revenues.
However, as of now, coal dominates Pinnacle West’s generation mix. The company could face the brunt of cost pressure, given the Clean Power Plan proposed by the U.S. Environmental Protection Agency, which calls for a cutback in carbon emissions during power generation by 30% by 2030 from the 2005 levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment