CMS Energy Tops Estimates – Analyst Blog

CMS Energy Corporation’s (CMS) fourth-quarter earnings of 38 cents pushed past the Zacks Consensus EPS estimate of 36 cents and 30 cents in the prior-year quarter. The company clocked an EPS of $1.26 in fiscal 2009 compared to the Zacks Consensus Estimate of $1.24. Fiscal 2009 EPS also topped EPS of $1.21 in fiscal 2008.

 

 

Revenue fell to $1.6 billion in the reported quarter from $1.8 billion in the year-ago quarter due to a tepid economy affecting the demand for electricity. The falling trend was witnessed in fiscal 2009 results as well, where revenue fell to $6.2 billion from $6.8 billion in fiscal 2008.

 

On a GAAP basis, CMS Energy reported a net income of $218 million, or 91 cents per share, for fiscal 2009, compared to a net income of $284 million, or $1.20, for fiscal 2008. The variance between GAAP and adjusted earnings was due to the exclusion of the effects of asset sales and certain other items.

 

Similarly, reported quarter GAAP earnings were $6 million, or 2 cents per share, compared to the reported net income of $60 million, or 26 cents, in the year-ago quarter. Reported quarter results include a one-time charge of $79 million, or 33 cents per share, related to a February 2010 regulatory decision requiring Consumers Energy − CMS Energy’s Michigan electric and natural gas utility − to refund to customers certain revenues collected from 2001 to 2003 related to a nuclear plant decommissioning.

 

 

CMS Energy reported cash and cash equivalents of $90 million at fiscal-end 2009 from $207 million at fiscal-end 2008. The company reported $848 million in cash from operating activities at fiscal-end 2009, compared to $557 million at fiscal-end 2008. Total debt increased to $6.6 million at fiscal-end 2009 from $6.5 billion at fiscal-end 2008.

 

 

CMS Energy has witnessed a mixed trend in earnings surprises over the past four quarters. The average is a positive at 1.43%, reflecting the utility’s stable performance during this period.

 

Of the 14 analysts covering the stock in fiscal 2010, one has upped the earnings estimate in the last 30 days. CMS Energy expects adjusted EPS in fiscal 2010 to be $1.35, in line with the Zacks Consensus Estimate.

 

Going forward, stable regulated utility operations, beneficial regulatory policies in Michigan, higher rates, strong balance sheet, incremental dividend and a relatively cheap earnings-based valuation support our bullish outlook for the company. However, the present unfavorable macro backdrop, lower demand for electricity, the dismal Michigan economy and pending regulatory cases continue to restrain valuation. This justifies our Neutral recommendation for the stock (Zacks #3 Rank).