Monday, Citi initiated coverage on Pinnacle West Capital (NYSE: NYSE:PNW), assigning a Neutral rating and establishing a price target of $78.00.
The firm's position is based on several key factors affecting the utility company's outlook. Among these is the potential for regulatory reform in Arizona, where Pinnacle West is based. While changes towards formula rates could occur, Citi anticipates this is unlikely within the next year due to the upcoming elections.
The analyst also noted that "load growth may accelerate, but earnings benefits appear contained." This tempered expectation is partly due to the fact that low-interest debt maturities are expected to exert some drag on the company's earnings.
Additionally, the retirement of the Four Corners coal plant that is around 7 years away is highlighted as a factor in the firm's outlook.
InvestingPro Insights
As investors consider Citi's Neutral rating on Pinnacle West Capital, it's valuable to look at the company's current financial standing through real-time data from InvestingPro. Pinnacle West has a market capitalization of approximately $9.08 billion, with a Price to Earnings (P/E) ratio of 16.76, slightly adjusting to 18.18 for the last twelve months as of Q4 2023. This P/E ratio indicates the company is trading at a premium relative to its earnings. Additionally, while the company has experienced an 8.59% revenue growth over the last twelve months, the quarterly revenue growth has seen a slight decline of 1.76% in Q4 2023.
InvestingPro Tips highlight that Pinnacle West is operating with a significant debt burden, which could be a concern for risk-averse investors. However, the company's ability to raise its dividend for 12 consecutive years, maintaining dividend payments for 32 consecutive years, and the prediction of profitability this year offer a counterbalance to the debt concerns. These aspects are essential for investors seeking stable dividend income and long-term profitability.
For those interested in delving deeper, there are additional InvestingPro Tips available that can provide further insight into Pinnacle West's financial health and projections. To explore these tips and make more informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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