2024-07-12 11:37:05 ET
Summary
- This is Arizona’s largest electric utility, now with 1.4 million customers and Phoenix and Flagstaff in its territory.
- It weathered an adverse regulatory decision in 2021 that cut its earnings, but this is now overturned and reasonable rates restored.
- Earnings outlooks were revised upward and dividend growth at higher rates should resume next year.
- Data centers and population growth in Arizona are expected to increase electric demand, benefiting Pinnacle West as the primary utility in the state. It remains an attractive dividend stock.
I last covered Pinnacle West ( PNW ) back in November of 2023 when its shares were trading at $70.50, down some 31.9% from their February 2020 peak of $103.50. This was largely due to a significant drop in earnings, the direct result of an adverse regulatory decision from the Arizona Corporation Commission (ACC). In 2022, PNW's earnings were $4.26 per share , down from $5.47 in 2021, and $0.98 of this difference was attributed to the 2021 rate cut . PNW's allowable return on equity was reduced from 10.25% to 8.7%, among the lowest in the nation. In November, I suggested the company was a buy below $70.00 per share, largely because of the then 5.0% dividend. However, the landscape for this utility has changed since then, for the better, and Pinnacle West shares are now trading at $80.01....
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Pinnacle West: Shares Look Fully Valued Now, But Growth Is On The Horizon