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PINNACLE WEST CAPITAL CORP (PNW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 results: Operating revenues rose 10.5% year over year to $1.10B, while diluted EPS was a loss of $0.06 (vs. ~$0.00 in Q4 2023); full-year 2024 EPS increased to $5.24, driven by new rates, strong load growth, and weather, partially offset by higher O&M, D&A, and financing costs .
  • Management reiterated 2025 EPS guidance of $4.40–$4.60 and long-term EPS CAGR of 5–7% off the original 2024 midpoint, citing robust sales growth (4–6% weather-normalized in 2025, with 3–5% from extra-high load factor C&I) and a constructive regulatory backdrop focused on reducing lag via formula rates .
  • Arizona growth remains a core tailwind: 2024 customer growth was 2.1%, weather-normalized retail sales rose 5.7%, and APS set an all-time peak demand record of 8,210 MW amid record heat; management highlighted diversified C&I demand (semis/data centers) and 7,300 MW of new resources procured for 2026–2028 .
  • Near-term catalysts/risks: mid-2025 rate case filing including formula rate design; execution of a ~$9.66B 2024–2027 capex plan with ~40% tracked recovery; Arizona wildfire liability legislation; and leadership transition to incoming CEO Ted Geisler on April 1, 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Strong 2024 fundamental momentum: full-year diluted EPS of $5.24 (up $0.83 YoY) on new rates, strong sales/usage, and weather; 2024 customer growth 2.1% and weather-normalized sales growth 5.7% .
    • Reliability and nuclear performance: Top-quartile reliability through record heat; Palo Verde achieved 93.7% capacity factor and >30 million MWh for the 16th consecutive year .
    • Load and resource planning: Management procured ~7,300 MW of new resources for 2026–2028 and expects to add 9,805 MW (2025–2028), >90% carbon-free, with SRB/FERC mechanisms improving recovery timeliness .
    • Quote: “We are reiterating all aspects of 2025 guidance… Weather-normalized sales growth guidance for 2025 remains unchanged at 4% to 6%” – CFO Andrew Cooper .

  • What Went Wrong

    • Seasonal loss in Q4: EPS of $(0.06) vs. ~$0.00 in Q4 2023, as higher O&M, D&A, and financing costs offset benefits from rates/weather/sales .
    • Regulatory lag still impacts 2025 bridge: 2025 EPS guide below 2024 actual, reflecting lag in O&M, D&A, and interest, plus OPEB amortization roll-off and prior asset sale gain comp headwinds (partially mitigated by trackers and SRB) .
    • Inflationary and financing pressures: Year-over-year increases in interest expense and D&A from elevated capital needs and rate environment; management highlighted cost control but acknowledged higher run-rate expenses and financing costs .

Financial Results

MetricQ4 2023Q3 2024Q4 2024Consensus
Operating Revenues ($B)$0.992 $1.769 $1.095 N/A
Diluted EPS ($)$0.00 $3.37 $(0.06) N/A
Operating Income ($M)$74.4 $547.0 $84.5 N/A
Net Income Attributable to Common ($M)$(0.0) $395.0 $(6.8) N/A
EBIT Margin %7.5% (74.4/991.6) 30.9% (547.0/1,768.8) 7.7% (84.5/1,095.4) N/A
EBITDA Margin %28.0% ((74.4+203.6)/991.6) 43.9% ((547.0+229.5)/1,768.8) 28.8% ((84.5+230.6)/1,095.4) N/A
Net Income Margin %~0.0% (−0.0/991.6) 22.3% (395.0/1,768.8) −0.6% (−6.8/1,095.4) N/A

Notes: Margins calculated from reported figures; Q3 included for sequential context .

Segment/categorical revenue breakdown (Q4)

Revenue Category ($M)Q4 2023Q4 2024
Retail – Residential454 505
Retail – Business476 542
Sales for Resale (Wholesale)28 20
Transmission for Others30 25
Other Misc. Services3 3
Total Operating Revenues992 1,095

Key KPIs

KPIQ4 2023Q4 2024FY 2024
Avg. Retail Customers1,382,688 1,413,451 1,400,036
Customer Growth YoY2.0% 2.2% 2.1%
Retail Sales (GWh)6,870 7,301 33,701
Weather-Normalized Retail Sales YoY4.0% 5.5% 5.7%
Peak Demand (MW)——8,210 (Aug 4, 2024)

Estimates column: S&P Global consensus unavailable at the time of analysis due to request limits; we therefore do not present estimate comparisons for this quarter.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (diluted)2025$4.40–$4.60 (Q3 call) $4.40–$4.60 Maintained
Weather-Normalized Sales Growth20254–6% (Q3 call) 4–6% (incl. 3–5% from extra-high LF C&I) Maintained (detail reiterated)
Adjusted Gross Margin2025—$3.13–$3.19B Framework reiterated
Adjusted O&M2025—$965–$985M Framework reiterated
Other OpEx (D&A + Taxes other than income taxes)2025—$1.16–$1.18B Framework reiterated
Other income (net)2025—$0–$6M Framework reiterated
Net Interest (net of AFUDC)2025—$350–$370M (Total AFUDC ~$120M) Framework reiterated
Effective Tax Rate2025—13.75–14.25% Framework reiterated
Avg. Diluted Shares2025—122.3M Framework reiterated
Retail Customer Growth20251.5–2.5% (Q3 call) 1.5–2.5% Maintained
Long-term EPS growth2024–20285–7% off 2024 midpoint (Q3) 5–7% off original 2024 midpoint Maintained
DividendOngoingQuarterly $0.895 declared (Oct/Dec 2024) No change disclosedMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Regulatory lag / formula ratesACC workshops on formula rates; focus on reducing lag; timeline discussions; elections supportive of regulatory lag docket .Commission adopted policy statement on formula rates (Dec. 2024); plan to file mid-2025 rate case including formula design; expect resolution ~late 2026, with formula true-up thereafter .Constructive progress; clearer path to reduced lag.
C&I/data centers/semis loadPersistent 10%+ C&I growth; >4,000 MW extra-high LF committed; >10,000 MW in planning; TSMC phases embedded .Continued strong sales growth (5.5% Q4 WN); 2025 WN sales +4–6% with 3–5% from high LF C&I; TSMC Fab 1 in high-volume production in Q4 .Demand pipeline intact; ramp continues.
Capex/transmission/generationCapex plan raised to ~$9.65B through 2027; >40% tracked via SRB/FERC; equity plan updated .~$9.66B 2024–2027 plan; ~40% tracked; multiple strategic transmission projects in siting; SRB assets underway (Agave BESS, Sundance, Ironwood, Redhawk) .Execution advancing; plan essentially steady.
Wildfire legislation—Monitoring AZ HB 2201 on wildfire mitigation/liability; supportive but early in process .Policy watch; potential risk mitigation.
Nuclear/SMRs strategy—Early-stage assessment with SRP/TEP on new nuclear (long lead), monitor tech and supply maturity; Palo Verde performance remains cornerstone .Long-dated option; no near-term capex.
Customer experience & reliabilityTop-tier J.D. Power rankings, heat support programs, virtual power plant (95k+ thermostats, ~160 MW) .Top-quartile reliability through record heat; continued customer-centric initiatives; high satisfaction metrics .Sustained focus; reputational strength.
Financing / equityBlock equity in early 2024; evaluating ATM; external equity need <40% of new capex .Opened ATM program late 2024; 2025–2027 plan balances debt/equity; maintain IG ratings .Funding matches capex cadence.

Management Commentary

  • “We lost $0.06 per share during the fourth quarter of 2024… For the full year 2024, we ended at $5.24 per share… slightly above our updated annual guidance range.” – CFO Andrew Cooper .
  • “In fact, we recently procured nearly 7,300 megawatts of new resources to be in service between 2026 and 2028.” – APS President Ted Geisler .
  • “For the 16th consecutive year… Palo Verde… exceeded 30 million-megawatt hours of net generation and achieved a capacity factor of 93.7%.” – CEO Jeff Guldner .
  • “We are reiterating all aspects of 2025 guidance provided on our third quarter 2024 call.” – CFO Andrew Cooper .
  • “We’re focused on executing our plan and expect to file a new rate case midyear 2025… [to] implement a formula rate plan in the future.” – APS President Ted Geisler .

Q&A Highlights

  • Formula rate/rate case process: Management prepares for a litigated case with potential partial settlements; mid-2025 filing, possible resolution by end-2026, then annual formula true-ups; ROE would be addressed in the case and then maintained under the formula construct .
  • Growth and EPS trajectory: Focus remains on delivering a smoother 5–7% EPS CAGR; robust load supports outlook, but primary goal is lag reduction via formula rates to smooth earnings profile .
  • Capex beyond 2027 and allocation: Longer-dated generation and high-voltage transmission extend into 2030s; under a formula regime, potential to re-allocate more to distribution and generation maintenance (e.g., Palo Verde) with improved recovery .
  • Wildfire legislation: Early-stage AZ HB 2201 is supported; seen as aligning entities on prevention and liability standards; too early to handicap outcome .
  • New nuclear: Early-stage assessment with Arizona utilities on locations/technology; decision criteria depend on technology and supply-chain maturity; no commitment yet .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for Q4 2024 and forward quarters were unavailable due to request-limit constraints at the time of analysis, so we do not provide a vs-consensus comparison for revenue or EPS this quarter. We anchor on company-reported results and management guidance instead .

Key Takeaways for Investors

  • Load-driven story intact: 2024 weather-normalized sales +5.7% with 2.1% customer growth; 2025 guidance embeds 4–6% WN sales growth with 3–5% from high LF C&I (semis/data centers) .
  • Regulatory de-risking advancing: ACC policy statement on formula rates plus mid-2025 filing offer a path to reduce lag and smooth earnings, a key re-rating catalyst as mechanisms get implemented .
  • Capital plan executable and increasingly tracked: ~$9.66B (2024–2027) with ~40% under SRB/FERC helps mitigate lag; multiple strategic transmission and SRB projects in-flight .
  • 2025 EPS step-down vs. 2024 actual is known and guided: Driven by lagged O&M/D&A/interest, OPEB roll-off, and one-time comps; reaffirmed $4.40–$4.60 range provides transparency while lag solutions mature .
  • Balance sheet and funding aligned: ATM program open; equity needs paced to capex; goal to maintain solid IG ratings and APS equity layer >50% .
  • Leadership continuity: CEO transition to APS President Ted Geisler on April 1, 2025; strategic priorities (customer experience, grid expansion, regulatory modernization) unchanged .
  • Watch list: timing/details of formula rate implementation, outcomes in the mid-2025 rate case, execution on 2026–2028 resource adds, and Arizona wildfire legislation progression .