PNW Stock Forecast & Price Target

Pinnacle West Capital is poised for growth, supported by a projected annual capital expenditure increase to $1.95 billion and $2.00 billion for 2024-2025, which will enhance its rate base at a compound annual growth rate of 6-8%. The company's robust customer growth, especially from data centers in Phoenix, is anticipated to contribute significantly to a sales growth rate of 4-6% over the next five years, with the large customer class alone expected to account for 5-7% of this. Additionally, improving regulations in Arizona, along with the company's extensive reliance on clean energy sources, position Pinnacle West favorably in the electric utility market.

Pinnacle West Capital's outlook is negatively influenced by the initiation of 2024 EPS guidance of $4.60-$4.80, which falls slightly below consensus expectations and indicates challenges in achieving the projected long-term growth rate of 5-7%. The company's anticipated flat year-over-year EPS growth for 2025, alongside ongoing earnings lag attributed to regulatory delays, suggests limited financial progression in the near future. Furthermore, the substantial unallocated long-term debt of approximately $1.4 billion within a total of $10.5 billion further constrains financial flexibility and necessitates a downward adjustment to the company's valuation.