Critical Contrast: TXNM Energy (NYSE:TXNM) versus Pinnacle West Capital (NYSE:PNW)

TXNM Energy (NYSE:TXNM) and Pinnacle West Capital (NYSE:PNW) are both utilities companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, institutional ownership, risk, valuation, profitability and analyst recommendations.

Volatility and Risk

TXNM Energy has a beta of 0.17, suggesting that its share price is 83% less volatile than the S&P 500. Comparatively, Pinnacle West Capital has a beta of 0.45, suggesting that its share price is 55% less volatile than the S&P 500.

Insider and Institutional Ownership

91.7% of TXNM Energy shares are owned by institutional investors. Comparatively, 91.5% of Pinnacle West Capital shares are owned by institutional investors. 1.1% of TXNM Energy shares are owned by insiders. Comparatively, 0.2% of Pinnacle West Capital shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for TXNM Energy and Pinnacle West Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TXNM Energy	0	3	0	0	2.00
Pinnacle West Capital	0	11	3	0	2.21

TXNM Energy presently has a consensus price target of $61.25, indicating a potential upside of 6.17%. Pinnacle West Capital has a consensus price target of $104.62, indicating a potential upside of 9.63%. Given Pinnacle West Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Pinnacle West Capital is more favorable than TXNM Energy.

Dividends

TXNM Energy pays an annual dividend of $1.69 per share and has a dividend yield of 2.9%. Pinnacle West Capital pays an annual dividend of $3.64 per share and has a dividend yield of 3.8%. TXNM Energy pays out 93.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pinnacle West Capital pays out 69.7% of its earnings in the form of a dividend. Pinnacle West Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares TXNM Energy and Pinnacle West Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TXNM Energy	$2.17 billion	2.93	$151.89 million	$1.81	31.87
Pinnacle West Capital	$5.55 billion	2.08	$616.53 million	$5.22	18.28

Pinnacle West Capital has higher revenue and earnings than TXNM Energy. Pinnacle West Capital is trading at a lower price-to-earnings ratio than TXNM Energy, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares TXNM Energy and Pinnacle West Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TXNM Energy	9.04%	8.11%	2.34%
Pinnacle West Capital	11.52%	8.99%	2.08%

Summary

Pinnacle West Capital beats TXNM Energy on 11 of the 16 factors compared between the two stocks.

About TXNM Energy

TXNM Energy, Inc., through its subsidiaries, provides electricity and electric services in the United States. It operates through Public Service Company of New Mexico (PNM) and Texas-New Mexico Power Company (TNMP) segments. The PNM segment engages in the generation, transmission, and distribution of electricity. The segment owns and leases communications, office and other equipment, office space, vehicles, and real estate. It generates electricity using coal, natural gas and oil, and nuclear fuel and waste, as well as solar, wind, geothermal, and battery storage energy sources. The TNMP segment provides regulated transmission and distribution services. The segment also owns and leases vehicles, service facilities, and office locations throughout its service territory. The company serves residential, commercial, and industrial customers and end-users of electricity in New Mexico and Texas. The company was formerly known as PNM Resources, Inc and changed its name to TXNM Energy, Inc. in August 2024. TXNM Energy, Inc. was founded in 1882 and is based in Albuquerque, New Mexico.

About Pinnacle West Capital

Pinnacle West Capital Corporation, through its subsidiary, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include overhead lines and underground lines; and distribution facilities consist of overhead lines and underground primary cables. The company also owns and maintains transmission and distribution substations; and owns energy storage facilities. Pinnacle West Capital Corporation was incorporated in 1985 and is headquartered in Phoenix, Arizona.