Pinnacle West Capital Corp. (PNW) reported earnings of $2.08 per share, surpassing the Zacks Consensus Estimate of $2.01 and last year’s earnings of $1.96. The results were helped by higher revenues from retail electricity rate increases, better-than-expected weather conditions and increased capitalized financing costs related to projects under construction.
On a reported basis, the company earned $2.14 per share compared with $1.84 in the year-ago quarter.
Operational Results
Pinnacle West clocked operating revenues of $1.14 billion in the reported quarter, an increase of 4.6% compared with $1.09 billion in the year-ago quarter. Revenues in the quarter also beat the Zacks Consensus Estimate of $1.12 billion.
During the quarter, revenues at the Regulated Electricity segment improved 3.7% year over year to $1.12 billion, while Other revenues grew 332% to $22.9 million.
In the reported quarter, revenues were helped by retail base-rate hikes and higher line extension revenue, both implemented in January 2010. Total retail electricity sales dipped marginally by 0.05% year over year to 10,526 Gwh. Average electric customer growth in the quarter remained flat at 0.6% compared to last year.
Pinnacle West’s fuel and purchased power costs at the Regulated Electricity segment showed an improvement of 7.2% in the quarter, while the company’s overall operations and maintenance expenses increased 11.8% and depreciation & amortization expenses increased 1.2% in the quarter. This led total operating expenses to increase by 1.9% to $735.5 million.
Despite the rise in operating costs, the company’s operating income improved 9.9% to $403.6 million from $367.4 million in the year-ago period.
Pinnacle West reported quarterly consolidated net ongoing earnings of $226.7 million compared to $198.4 million for the year-ago quarter.
Financial Condition
Pinnacle West ended the quarter with cash and cash equivalents of $195.9 million and long-term debt of $3.3 billion, compared to $145.4 million of cash and $3.4 billion of long-term debt as of December 31, 2010.
In the first nine months ended September 30, 2010, the company generated $569.5 million of cash from operations and deployed $552.7 million towards capital expenditure, $84.5 million towards long-term debt repayments and $161.7 million towards dividends.
Outlook
For fiscal 2010, Pinnacle West reiterated its earnings per share guidance range of $2.95 to $3.10, in line with the Zacks Consensus Estimate of $3.02. The company also continues to forecast its 2011 consolidated earnings within the 2010 guidance range. There is, however, a possibility of modestly exceeding this range.
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