Will Pinnacle West Capital (PNW) Stock Be Positively Affected By This Ratings Upgrade?

NEW YORK (TheStreet) -- Pinnacle West Capital Corp. (PNW) was upgraded to "outperform" from "market perform" at Wells Fargo (WFC) on Monday.

The firm said it raised its rating on the electric utility holding company based on a valuation call, due to recent positive regulatory developments.

Wells Fargo upped its price target range on Pinnacle West to a range of $62-$64 from $58-$60.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Shares of Pinnacle West are up 0.42% to $57.04 at the start of trading on Monday.

Separately, TheStreet Ratings team rates PINNACLE WEST CAPITAL CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate PINNACLE WEST CAPITAL CORP (PNW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PINNACLE WEST CAPITAL CORP reported flat earnings per share in the most recent quarter. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PINNACLE WEST CAPITAL CORP increased its bottom line by earning $3.66 versus $3.50 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $3.66).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.21 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 39.64% is the gross profit margin for PINNACLE WEST CAPITAL CORP which we consider to be strong. Regardless of PNW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PNW's net profit margin of 14.61% compares favorably to the industry average.
  • PNW, with its decline in revenue, slightly underperformed the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: PNW Ratings Report

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