We raise our 12-month target $5 to $71, 17.7x our 2022 EPS estimate (raised $0.02 to $4.02; 2023 estimate raised $0.02 to $4.20), a 20%-25% discount to most peer valuations due to lower forecast EPS and dividend growth in the wake of the adverse 2019 AZ rate case outcome (currently being appealed). Q1 adj. EPS of $0.15 vs. $0.32 beat consensus by $0.08, as effective O&M cost management, healthy customer growth, strong economic trends in AZ (3.3% unemployment in March vs. 3.6% U.S. average), and above-forecast weather-adjusted retail electric sales growth (+4.4% vs. prior year quarter) continue to buoy the stock in the face of lower authorized revenues. PNW maintained its earnings guidance and feels comfortable with its capex plan despite broader federal investigations into tariff violations on solar panel imports, which could cause investment delays across the sector. PNW plans to file a new AZ rate case around mid-year, which could change our outlook if the company sees a more successful outcome this time.
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