Sector Update: Energy Stocks Gain Late Afternoon

Energy stocks were sharply higher late Wednesday afternoon, with the NYSE Energy Sector Index rising 2.7% and the Energy Select Sector SPDR Fund (XLE) climbing 4.5%.

The Philadelphia Oil Service Sector index jumped 7.9%, while the Dow Jones US Utilities index was down 0.5%.

US crude oil stocks, including those in the Strategic Petroleum Reserve, rose by 3.5 million barrels in the week ended Nov. 1 following an increase of 700,000 barrels in the previous week. Excluding inventories in the SPR, commercial crude oil stocks rose by 2.1 million barrels after a 500,000 barrel decline in the previous week, compared with the 90,000 barrel decrease expected in a survey compiled by Bloomberg.

Front-month West Texas Intermediate crude oil shed 0.3% to $71.81 a barrel while the global benchmark Brent crude contract was down 0.6% to $75.10 a barrel. Henry Hub natural gas futures popped 3.1% to $2.75 per 1 million BTU.

In corporate news, Delek US shares jumped 11% after the company reported Wednesday better-than-expected Q3 results.

Pinnacle West Capital Corporation PNW reported third-quarter 2024 earnings of $3.37 per share, which beat the Zacks Consensus Estimate of $3.35 by 0.6%. However, the bottom line decreased 3.7% from the year-ago quarter’s figure of $3.50.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Total Revenues of PNW

Sales for the quarter totaled $1.77 billion, which surpassed the Zacks Consensus Estimate of $1.68 billion by 5.2%. The top line also increased 7.9% from $1.64 billion recorded in the year-ago quarter.

Pinnacle West Capital Corporation Price, Consensus and EPS Surprise

Pinnacle West Capital Corporation price-consensus-eps-surprise-chart | Pinnacle West Capital Corporation Quote

PNW’s Operational Highlights

Total operating expenses were $1.22 billion, up 8.9% year over year. This was due to higher fuel and purchased power and increased operations and maintenance expenses.

Operating income totaled $547 million, up 5.9% from $516.3 million recorded in the year-ago quarter.

Total interest expenses were $109.9 million, up 13.4% from $96.9 million registered in the prior-year period.

PNW’s Financial Highlights

Cash and cash equivalents totaled $49.2 million as of Sept. 30, 2024, compared with $4.96 million as of Dec. 31, 2023.

Long-term debt-less current maturities amounted to $8.06 billion as of Sept. 30, 2024, compared with $7.54 billion as of Dec. 31, 2023.

Net cash flow provided by operating activities in the first nine months of 2024 totaled $1.17 billion compared with $0.83 billion recorded a year ago.

PNW’s Guidance

The company raised its 2024 consolidated earnings guidance to $5.00-$5.20 per share compared with the previous projection of $4.60-$4.80. The Zacks Consensus Estimate for the same is pegged at $4.90, lower than the company’s new guided range.

Pinnacle West plans to invest $9.65 billion in the 2024-2027 period to further strengthen its operations.

Management expects its retail customers to increase 1.5-2.5% in 2024 from the 2023 levels.

The company expects 2025 consolidated earnings to be in the range of $4.40-$4.60 per share on a weather-normalized basis.

PNW’s Zacks Rank

Pinnacle West currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Evergy EVRG is scheduled to report third-quarter results on Nov. 7, before market open. The Zacks Consensus Estimate for earnings is pegged at $1.95 per share, which suggests a year-over-year increase of 3.7%.

EVRG’s long-term earnings growth rate is 5.85%. The Zacks Consensus Estimate for 2024 earnings is pinned at $3.84 per share, which implies a year-over-year improvement of 8.5%.

NRG Energy NRG is scheduled to report third-quarter results on Nov. 8, before market open. The Zacks Consensus Estimate for earnings is pegged at $2.05 per share, which suggests a year-over-year increase of 26.5%.

The Zacks Consensus Estimate for 2024 earnings is pinned at $6.29 per share, which implies a year-over-year improvement of 45.6%. It delivered an average earnings surprise of 7% in the past four quarters.

UGI Corporation UGI is scheduled to report fiscal fourth-quarter results on Nov. 21, after market close. The Zacks Consensus Estimate for earnings is pegged at a loss of 30 cents per share.

The Zacks Consensus Estimate for sales is pinned at $1.54 billion, which implies a year-over-year improvement of 9.9%. It delivered an average earnings surprise of 99.1% in the past four quarters.

Zacks Investment Research

MGE (MGEE) came out with quarterly earnings of $1.13 per share, missing the Zacks Consensus Estimate of $1.17 per share. This compares to earnings of $1.05 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -3.42%. A quarter ago, it was expected that this public utility holding company would post earnings of $0.95 per share when it actually produced earnings of $0.66, delivering a surprise of -30.53%.

Over the last four quarters, the company has not been able to surpass consensus EPS estimates.

MGE, which belongs to the Zacks Utility - Electric Power industry, posted revenues of $168.48 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.85%. This compares to year-ago revenues of $160.53 million. The company has topped consensus revenue estimates just once over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

MGE shares have added about 25.6% since the beginning of the year versus the S&P 500's gain of 21.2%.

What's Next for MGE?

While MGE has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for MGE: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.64 on $167.94 million in revenues for the coming quarter and $3.69 on $674.38 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Utility - Electric Power is currently in the top 39% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Vistra Corp. (VST), another stock in the same industry, has yet to report results for the quarter ended September 2024. The results are expected to be released on November 7.

This company is expected to post quarterly earnings of $1.24 per share in its upcoming report, which represents a year-over-year change of -0.8%. The consensus EPS estimate for the quarter has been revised 30.1% lower over the last 30 days to the current level.

Vistra Corp.'s revenues are expected to be $4.96 billion, up 21.4% from the year-ago quarter.

Zacks Investment Research

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What are the Zacks Style Scores?

The Zacks Style Scores is a unique set of guidelines that rates stocks based on three popular investing types, and were developed as complementary indicators for the Zacks Rank. This combination helps investors choose securities with the highest chances of beating the market over the next 30 days.

Each stock is assigned a rating of A, B, C, D, or F based on their value, growth, and momentum characteristics. Just like in school, an A is better than a B, a B is better than a C, and so on -- that means the better the score, the better chance the stock will outperform.

The Style Scores are broken down into four categories:

Value Score

For value investors, it's all about finding good stocks at good prices, and discovering which companies are trading under their true value before the broader market catches on. The Value Style Score utilizes ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and a host of other multiples to help pick out the most attractive and discounted stocks.

Growth Score

Growth investors, on the other hand, are more concerned with a company's financial strength and health, and its future outlook. The Growth Style Score examines things like projected and historic earnings, sales, and cash flow to find stocks that will experience sustainable growth over time.

Momentum Score

Momentum traders and investors live by the saying "the trend is your friend." This investing style is all about taking advantage of upward or downward trends in a stock's price or earnings outlook. Employing factors like one-week price change and the monthly percentage change in earnings estimates, the Momentum Style Score can indicate favorable times to build a position in high-momentum stocks.

VGM Score

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A proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company's earnings outlook, to help investors create a successful portfolio.

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Stock to Watch: Pinnacle West (PNW)

Phoenix, AZ-based Pinnacle West Capital Corporation was incorporated in 1985. The company provides electricity services (wholesale or retail) in the state of Arizona through its subsidiaries. The company is involved in the generation, transmission and distribution of electricity from coal, nuclear, gas, oil and solar.

PNW is a #3 (Hold) on the Zacks Rank, with a VGM Score of B.

It also boasts a Value Style Score of B thanks to attractive valuation metrics like a forward P/E ratio of 17.71; value investors should take notice.

Two analysts revised their earnings estimate higher in the last 60 days for fiscal 2024, while the Zacks Consensus Estimate has increased $0.13 to $4.90 per share. PNW also boasts an average earnings surprise of 247.4%.

With a solid Zacks Rank and top-tier Value and VGM Style Scores, PNW should be on investors' short list.

Zacks Investment Research