In the regulated electric utility sector, The Southern Company (SO) and Pinnacle West Capital Corporation (PNW) stand out as key players with overlapping markets and a shared focus on innovation in energy generation. Both companies serve millions of customers while investing in diverse power sources, including renewables and nuclear. This article will analyze their strengths and growth potential to help you decide which utility stock aligns best with your investment goals.
Table of contents
Companies Overview
I will begin the comparison between The Southern Company and Pinnacle West Capital Corporation by providing an overview of these two companies and their main differences.
The Southern Company Overview
The Southern Company operates in the regulated electric industry, focusing on the generation, transmission, and distribution of electricity and natural gas. Serving approximately 8.7M customers, it manages diverse power assets including hydroelectric, fossil fuel, nuclear, solar, and wind facilities. Headquartered in Atlanta, it also offers digital wireless communications and fiber optics, positioning itself as a broad energy and utility service provider.
Pinnacle West Capital Corporation Overview
Pinnacle West Capital Corporation, through its subsidiary Arizona Public Service Company, delivers retail and wholesale electricity primarily in Arizona. It operates coal, nuclear, gas, oil, and solar power plants with a total regulated generation capacity of about 6,323 MW. Serving around 1.3M customers, it maintains extensive transmission and distribution infrastructure, emphasizing regional electric utility services from its Phoenix headquarters.
Key similarities and differences
Both companies are utilities operating in regulated electric markets, focusing on electricity generation, transmission, and distribution. Southern Company serves a larger customer base and has a more diversified energy mix including natural gas and renewable assets, while Pinnacle West concentrates on Arizona with a smaller scale and a mix that includes fossil fuels and nuclear. Southern’s broader geographic and service scope contrasts with Pinnacle West’s regional focus and generation capacity.
Income Statement Comparison
This table presents a side-by-side comparison of key income statement metrics for The Southern Company and Pinnacle West Capital Corporation for the fiscal year 2024.
| Metric | The Southern Company (SO) | Pinnacle West Capital Corporation (PNW) |
|---|---|---|
| Market Cap | 95.7B | 10.7B |
| Revenue | 26.7B | 5.1B |
| EBITDA | 13.2B | 2.1B |
| EBIT | 7.97B | 1.11B |
| Net Income | 4.40B | 609M |
| EPS | 4.02 | 5.35 |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
The Southern Company
From 2020 to 2024, The Southern Company’s revenue increased steadily by 31.16%, with net income growing even faster by 40.43%. Gross and EBIT margins remained strong, at roughly 50% and 30%, respectively, indicating solid operational efficiency. In 2024, revenue growth slowed to 5.83%, but gross profit and EBIT rose significantly, reflecting margin improvements and favorable profitability trends.
Pinnacle West Capital Corporation
Pinnacle West showed robust revenue growth of 42.88% over the 2020-2024 period, with net income increasing moderately by 10.58%. Gross margin held firm at 41.7%, while EBIT margin improved to 21.74%. The 2024 fiscal year saw a 9.13% revenue increase, accompanied by a 20.17% EBIT growth and 11.22% net margin expansion, indicating enhanced operational performance and profitability.
Which one has the stronger fundamentals?
Both companies exhibit favorable income statement fundamentals with strong margins and positive growth. Southern Company leads with higher overall net income growth and superior margin stability, despite slightly higher interest expenses. Pinnacle West demonstrates stronger recent revenue and EBIT growth but faces a declining net margin over the full period. Overall, Southern Company’s more consistent margin improvements suggest stronger fundamental resilience.
Financial Ratios Comparison
The table below presents a side-by-side comparison of key financial ratios for The Southern Company (SO) and Pinnacle West Capital Corporation (PNW) based on their most recent fiscal year 2024 data.
| Ratios | The Southern Company (SO) | Pinnacle West Capital Corporation (PNW) |
|---|---|---|
| ROE | 13.25% | 9.01% |
| ROIC | 4.25% | 3.48% |
| P/E | 20.5 | 15.85 |
| P/B | 2.72 | 1.43 |
| Current Ratio | 0.67 | 0.59 |
| Quick Ratio | 0.46 | 0.42 |
| D/E | 2.00 | 1.64 |
| Debt-to-Assets | 45.7% | 42.3% |
| Interest Coverage | 2.58 | 2.68 |
| Asset Turnover | 0.18 | 0.20 |
| Fixed Asset Turnover | 0.25 | 0.25 |
| Payout ratio | 67.1% | 64.8% |
| Dividend yield | 3.27% | 4.09% |
Interpretation of the Ratios
The Southern Company
The Southern Company shows a mixed financial profile with favorable net margin (16.47%) and WACC (4.96%) but faces concerns with low current and quick ratios (0.67 and 0.46) and high debt-to-equity (2.0). Asset turnover ratios are weak, indicating less efficient asset usage. It pays dividends with a favorable 3.27% yield, suggesting steady shareholder returns but potential risks from leverage and liquidity.
Pinnacle West Capital Corporation
Pinnacle West Capital exhibits a favorable net margin (11.88%) and low price-to-book ratio (1.43), but weaker return on equity (9.01%) and return on invested capital (3.48%) raise some concerns. Liquidity ratios are below 1, reflecting tight working capital. The dividend yield is higher at 4.09%, indicating attractive income but offset by slightly unfavorable leverage and asset turnover metrics.
Which one has the best ratios?
Both companies have slightly unfavorable overall ratios, primarily due to liquidity and asset efficiency challenges. Pinnacle West has a higher dividend yield and better valuation metrics, while The Southern Company benefits from stronger profitability margins. Neither stands out decisively; each presents a blend of strengths and weaknesses in their financial ratios.
Strategic Positioning
This section compares the strategic positioning of The Southern Company and Pinnacle West Capital Corporation, focusing on Market position, Key segments, and Exposure to technological disruption:
The Southern Company
- Large market cap of 95.7B with broad competitive presence in regulated electric utilities.
- Diversified segments including gas distribution, pipeline investments, wholesale gas, and renewable power generation.
- Invests in renewable projects and digital communications, managing various power generation types including hydro, solar, wind, and nuclear.
Pinnacle West Capital Corporation
- Smaller market cap of 10.7B, focused competitively in Arizona’s regulated electric market.
- Concentrated on electric service with generation, transmission, and distribution mainly in Arizona.
- Uses coal, nuclear, gas, oil, and solar generating facilities with no explicit mention of digital or renewable diversification.
The Southern Company vs Pinnacle West Capital Corporation Positioning
The Southern Company pursues a diversified approach across gas, electric, and renewable segments, offering broader market exposure. Pinnacle West Capital maintains a concentrated focus on Arizona’s electric utility, which limits geographic and segment diversification but may simplify operations.
Which has the best competitive advantage?
Both companies are currently shedding value with ROIC below WACC; however, The Southern Company shows a growing ROIC trend, suggesting improving profitability, whereas Pinnacle West experiences declining profitability, indicating a weaker competitive advantage.
Stock Comparison
The past year has seen both The Southern Company (SO) and Pinnacle West Capital Corporation (PNW) demonstrate strong bullish trends with notable price growth, although recent months reveal a deceleration and a shift toward seller dominance in trading volumes.
Trend Analysis
The Southern Company’s stock appreciated by 30.88% over the past 12 months, indicating a bullish trend with decelerating momentum. The price ranged between 66.48 and 98.29, with a recent reversal losing 9.25% from October 2025 to January 2026.
Pinnacle West Capital Corporation’s stock increased by 31.14% over the same period, also bullish with deceleration. The price fluctuated between 67.92 and 94.45, experiencing a milder recent decline of 3.31% during the last quarter of 2025.
Comparing both, Pinnacle West Capital Corporation slightly outperformed The Southern Company in annual gains, though both stocks show recent downward pressure amid seller dominance in trading activity.
Target Prices
The consensus target prices for The Southern Company and Pinnacle West Capital Corporation suggest moderate upside potential.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| The Southern Company | 103 | 76 | 93.1 |
| Pinnacle West Capital Corporation | 115 | 85 | 96.33 |
Analysts expect The Southern Company’s stock to trade modestly above the current price of 87.01 USD, while Pinnacle West’s consensus target of 96.33 USD also indicates potential appreciation from its current 89.07 USD price.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for The Southern Company and Pinnacle West Capital Corporation:
Rating Comparison
The Southern Company Rating
- Rating: B-, classified as Very Favorable by analysts.
- Discounted Cash Flow Score: 3, indicating a Moderate valuation.
- ROE Score: 4, showing a Favorable return on equity.
- ROA Score: 3, reflecting Moderate asset utilization.
- Debt To Equity Score: 1, considered Very Unfavorable risk.
- Overall Score: 3, a Moderate overall financial standing.
Pinnacle West Capital Corporation Rating
- Rating: C+, also classified as Very Favorable by analysts.
- Discounted Cash Flow Score: 1, a Very Unfavorable valuation.
- ROE Score: 3, indicating a Moderate return on equity.
- ROA Score: 3, similarly Moderate asset utilization.
- Debt To Equity Score: 1, also Very Unfavorable risk.
- Overall Score: 2, a Moderate but lower overall standing.
Which one is the best rated?
Based strictly on the data, The Southern Company holds a higher rating (B-) and stronger scores in Discounted Cash Flow and ROE compared to Pinnacle West’s C+ rating and lower corresponding scores. Both share similar debt risk levels.
Scores Comparison
The comparison of scores for The Southern Company and Pinnacle West Capital Corporation is as follows:
SO Scores
- Altman Z-Score: 0.98, in distress zone indicating high bankruptcy risk.
- Piotroski Score: 6, classified as average financial strength.
PNW Scores
- Altman Z-Score: 0.73, in distress zone indicating high bankruptcy risk.
- Piotroski Score: 4, classified as average financial strength.
Which company has the best scores?
Both companies fall into the distress zone for Altman Z-Score, signaling financial risk. SO has a slightly higher Altman Z-Score and Piotroski Score than PNW, suggesting relatively better financial health within the provided data.
Grades Comparison
Here is the recent grading summary and rating analysis for The Southern Company and Pinnacle West Capital Corporation:
The Southern Company Grades
The table below shows the latest grades assigned by reputable financial institutions for The Southern Company:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| UBS | Maintain | Neutral | 2025-12-17 |
| JP Morgan | Maintain | Neutral | 2025-12-15 |
| Jefferies | Maintain | Neutral | 2025-12-15 |
| RBC Capital | Maintain | Sector Perform | 2025-12-12 |
| Keybanc | Maintain | Underweight | 2025-12-12 |
| Mizuho | Maintain | Neutral | 2025-12-11 |
| Barclays | Maintain | Equal Weight | 2025-11-20 |
| Jefferies | Downgrade | Neutral | 2025-11-05 |
| Ladenburg Thalmann | Downgrade | Neutral | 2025-10-17 |
| Keybanc | Maintain | Underweight | 2025-10-15 |
The Southern Company’s grades predominantly reflect a neutral or hold stance, with some underweight recommendations and recent downgrades from buy ratings.
Pinnacle West Capital Corporation Grades
Below is the recent grading summary from credible grading companies for Pinnacle West Capital Corporation:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| UBS | Maintain | Neutral | 2025-12-17 |
| Keybanc | Downgrade | Sector Weight | 2025-12-12 |
| Keybanc | Maintain | Overweight | 2025-10-15 |
| UBS | Maintain | Neutral | 2025-10-10 |
| Barclays | Maintain | Equal Weight | 2025-10-07 |
| Argus Research | Maintain | Buy | 2025-09-30 |
| Morgan Stanley | Maintain | Equal Weight | 2025-09-25 |
| UBS | Maintain | Neutral | 2025-09-12 |
| Mizuho | Downgrade | Neutral | 2025-09-09 |
| Barclays | Maintain | Equal Weight | 2025-08-13 |
Pinnacle West Capital’s grades mostly indicate a neutral or hold consensus, with some overweight and buy ratings, balanced by a recent downgrade from outperform to neutral.
Which company has the best grades?
Both companies currently hold a consensus rating of “Hold.” However, Pinnacle West Capital shows a slightly more positive outlook with multiple overweight and buy ratings, whereas The Southern Company has more neutral and underweight assessments. This could suggest a marginally stronger sentiment towards Pinnacle West among analysts, potentially influencing investor confidence differently.
Strengths and Weaknesses
Below is a comparative overview of key strengths and weaknesses of The Southern Company (SO) and Pinnacle West Capital Corporation (PNW) based on the most recent financial and operational data available.
| Criterion | The Southern Company (SO) | Pinnacle West Capital Corporation (PNW) |
|---|---|---|
| Diversification | Strong diversification with significant gas and electric utilities segments; Southern Company Gas and Electric Utilities generate multi-B revenues | More concentrated in electric service with smaller wholesale and transmission revenues; less diversified |
| Profitability | Net margin favorable at 16.47%, ROE neutral at 13.25%, but ROIC unfavorable at 4.25% below WACC | Net margin favorable at 11.88%, but ROE and ROIC unfavorable; ROIC below WACC indicating value destruction |
| Innovation | Growing ROIC trend (+13%) suggests improving operational efficiency and profitability | Declining ROIC trend (-5%) signals deteriorating efficiency and profitability |
| Global presence | Primarily US-focused utilities; large regional footprint but limited international exposure | Regional focus with limited geographic diversification |
| Market Share | Large market share in gas distribution and electric utilities with revenues over 22B in electric utilities segment | Smaller scale with electric service revenue around 2.56B; more modest market share |
In summary, Southern Company shows stronger diversification and a growing profitability trend despite some value destruction signals, while Pinnacle West faces challenges with declining profitability and less diversification. Both companies exhibit slightly unfavorable financial ratios, warranting cautious investment consideration.
Risk Analysis
Below is a comparative overview of key risk factors for The Southern Company (SO) and Pinnacle West Capital Corporation (PNW) as of 2024.
| Metric | The Southern Company (SO) | Pinnacle West Capital Corporation (PNW) |
|---|---|---|
| Market Risk | Low beta (0.447) indicates lower volatility vs. market | Moderate beta (0.543) suggests moderate market sensitivity |
| Debt level | Debt-to-Equity: 2.0 (unfavorable), Debt-to-Assets: 45.65% (neutral) | Debt-to-Equity: 1.64 (unfavorable), Debt-to-Assets: 42.33% (neutral) |
| Regulatory Risk | High, due to regulated utility status and multi-state operations | High, regulated utility with Arizona focus and diverse generation sources |
| Operational Risk | Complex asset base with fossil, nuclear, renewables; moderate asset turnover (0.18) | Diverse generation portfolio; slightly better asset turnover (0.20) |
| Environmental Risk | Exposure to fossil fuels and nuclear; growing renewables mitigates risk | Coal, nuclear, and gas generation present environmental compliance risks |
| Geopolitical Risk | Low, primarily US domestic operations | Low, focused on Arizona domestic market |
In synthesis, both companies face significant debt-related risks and regulatory challenges inherent to regulated utilities. Southern Company’s extensive fossil and nuclear assets increase environmental and operational risks, while Pinnacle West’s coal reliance also poses environmental concerns. Market risk is moderate to low for both. Importantly, their Altman Z-Scores indicate financial distress zones, signaling elevated bankruptcy risk, which warrants cautious risk management.
Which Stock to Choose?
The Southern Company (SO) shows favorable income growth with a 31.16% revenue increase and 40.43% net income growth over 2020–2024. Its financial ratios are slightly unfavorable overall, with a 16.47% net margin and 13.25% ROE, but a high debt-to-equity ratio weighs negatively. Profitability is improving, yet the company carries significant debt and earns a very favorable B- rating.
Pinnacle West Capital Corporation (PNW) exhibits strong income performance, including 42.88% revenue growth and 10.58% net income growth overall, with mostly favorable income statement metrics. Its financial ratios are slightly unfavorable, marked by a 11.88% net margin, lower ROE at 9.01%, and moderate debt levels. Profitability trends are declining, and it holds a very favorable C+ rating.
For investors prioritizing growth and improving profitability, SO’s favorable income trends and moderate rating might appear more attractive despite higher leverage. Conversely, those emphasizing income stability and valuation metrics could find PNW’s steady revenue growth and slightly more conservative debt profile more suitable, though its declining profitability signals caution.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of The Southern Company and Pinnacle West Capital Corporation to enhance your investment decisions:
