Pinnacle West Capital Corporation
Analysis
Arizona's growth is real, and Pinnacle West is now building for it faster than the money comes back. The pending rate case decides whether that growth ever reaches the bottom line. What does the rate case outcome mean for 2026 earnings?
- The growth pipeline keeps getting bigger, not smaller.
TSMC added another $100 billion to its Arizona plan this quarter, and the company has already signed up about 4.5 gigawatts of new large load, with a much bigger queue behind it. Most of that ramp has not arrived yet. How much of the 20 gigawatt queue is likely to sign this year?
- The build is being paid for years before it earns anything.
Capital spending over the last four quarters was about $2.6 billion against $1.8 billion of cash the business generated; total debt rose roughly $1.7 billion in a year. Every dollar of this build is borrowed before it earns anything. How much of that spending already earns a return in rates?
- The rate case decides whether all this growth reaches profit.
2026 guidance assumes no rate case outcome and lower earnings than last year, even as demand sets records. Management calls a formula rate the route to 'more linear' earnings. Land it and growth reaches profit; miss it and costs run ahead.
- Contracted load growthThe bull case is that a large share of new demand is already signed, so the construction program is responding to committed customers rather than to a forecast.
- Federal formula rate recoveryTransmission investment earns a return through a federal formula rate that trues up every year, which recovers part of the capital plan faster than a general rate case.
- Cost control and prefundingManagement has cut operating cost per megawatt hour and prefunded its equity needs, which limits how much new stock the growth plan requires.
- Regulatory lagThe bear case is that earnings depend on Arizona commission decisions, and the pending rate case contributes nothing to guidance until it is decided.
- Cash funding gapCapital spending runs well above the cash the business generates, so the growth plan is financed with debt and new shares rather than retained earnings.
- Guidance step-downManagement guides to lower earnings next year on normal weather and higher financing costs, so asset growth is not yet reaching per-share results.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$50K | Jan 6 | May 13 |
Donna E. Shalala Democratic · House · FL-27 | Purchase | ≥$1K | Mar 19 | Apr 27 |
Donna E. Shalala Democratic · House · FL-27 | Purchase | ≥$1K | Apr 3 | Apr 27 |
Ro Khanna Democratic · House · CA-17 | Sale | ≥$1K | Mar 24 | Apr 20 |
Ro Khanna Democratic · House · CA-17 | Purchase | ≥$1K | Jan 8 | Feb 10 |
Congressional trading data provided by QuiverQuant
How Pinnacle West Capital turned $5.3B of revenue into $1.1B of operating income.
| Revenue | ||
|---|---|---|
| Electric Service | $2.5B | ▼ 0.78% YoY |
| Electric and Transmission Service | $129.7M | ▲ 8.93% YoY |
| Wholesale Energy | $108.7M | ▲ 12.19% YoY |
| Total revenue | $5.3B | |
| Gross profit | $3.4B | 63.8% |
| Operating income | $1.1B | 20.0% |