Pinnacle West's Loss Narrows in 1Q - Analyst Blog

By Zacks | May 03, 2012 AAA

Pinnacle West Capital Corp.'s (PNW) adjusted loss of 7 cents per share in the first quarter of 2012 was in line with the Zacks Consensus Estimate. However, loss narrowed down considerably from the year-ago loss of 15 cents. Adjusted loss was $7.5 million compared with $15.1 million in the first quarter of 2011. Solid operational performance coupled with lower expenses more than offset the milder weather and little lower customer usage, thereby aiding the company to narrow loss.

Adjusting for loss from discontinued real estate and energy services businesses of $0.8 million or 1 cent a share, the company reported net loss of $8.3 million or 8 cents per share, compared with a loss of $15.1 million or 14 cents per share reported in year ago quarter.


Pinnacle West's revenue was $620.6 million in the quarter, down 4.3% from the year-ago revenue of $648.8 million. Revenues missed the Zacks Consensus Estimate of $673 million. A decrease in Regulated Electricity segment revenue was largely responsible for the overall decline.

Operational Results

Total regulated electricity delivered in the quarter inched up 0.8% to 6,802 Gwh compared with 6,747 Gwh last year.

During the quarter, retail electricity sales declined 3.1% to 5,743 Gwh compared with 5,926 Gwh last year. The decrease was due to lower electricity consumption by business as well as residential customers.

Also, average electric customer growth in the quarter was 0.8% compared with 0.4% in the year-ago comparable period.

On the cost side, fuel and purchased power costs at the Regulated Electricity segment increased 2% in the quarter, while the company's operations and maintenance (O&M) expenses were down 17%. The O&M expense decline was primarily due to lower power plant maintenance costs.

Depreciation & amortization expenses decreased 6% in the quarter. These factors were largely responsible for a 6.6% year over year decline in operating expense.

The magnitude of decrease in expense more than offset the magnitude of revenue decline, thereby driving operating income to grow 34% in the quarter.

Financial Condition

As of March 31, 2012, Pinnacle West's cash and cash equivalents slumped to $20.7 million from 2011 end level of $33.5 million.

Long-term debt of $3.3 billion increased 11% from the 2011 end level.

The company generated $115.3 billion in cash from operations during the quarter, plummeting 53% year over year.

Capital expenditure escalated 26% year over year to $241 million.

Zacks Rank

We retain our Neutral recommendation on Pinnacle West Capital. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Phoenix, Arizona-based Pinnacle West Capital Corporation provides electricity services in the state of Arizona, through its subsidiaries. The company is involved in the generation, transmission, and distribution of electricity from coal, nuclear, gas and oil, and renewable resources. The company primarily competes with UniSource Energy Corporation (UNS) and Southwest Gas Corporation (SWX).

PINNACLE WEST (PNW): Free Stock Analysis Report
SOUTHWEST GAS (SWX): Free Stock Analysis Report
UNISOURCE ENRGY (UNS): Free Stock Analysis Report
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