Michigan-based CMS Energy Corporation (CMS) announced adjusted earnings for the fourth quarter 2011 of 15 cents per share, in line with the Zacks Consensus Estimate. However, the results were below the year-ago earnings of 21 cents per share. On a reported basis, the company clocked earnings of 15 cents per share versus 9 cents in the year-ago quarter.
Fiscal 2011 adjusted earnings came in at $1.45 per share, falling short of the Zacks Consensus Estimate of $1.46 by a penny. The reported figure was, however, higher than fiscal 2010 earnings of $1.36 per share. On a reported basis, fiscal 2011 earnings were $1.58 per share versus fiscal 2010 earnings of $1.28 per share.
The variance of 13 cents between earnings on reported and adjusted basis in fiscal 2011 was owing to the one-time items, tax changes (12 cents) and income of a penny from discontinued operations.
Operational Performance
Operating revenue of CMS Energy in the quarter under review grossed $1.62 billion, down 3.7% year over year. Results were also lower than the Zacks Consensus Estimate by $405 million. Operating expense in the quarter fell to $1.45 billion from $1.52 billion year over year. CMS Energy reported operating income of $174 million, 10.1% higher than $158 million in the year-ago quarter. Overall, the company reported net income of $41 million compared with a net income of $25 million in the year-ago quarter.
CMS Energy’s revenue increased 1.1% to approximately $6.50 billion in fiscal 2011 versus $6.43 billion in fiscal 2010. However, it was below the Zacks Consensus Estimate of $6.72 billion.
Financial Position
CMS Energy ended fiscal 2011 with cash and cash equivalents of $161 million, lower than $247 million at the end of fiscal 2010. Total debt, capital and finance leases narrowed down to $7.09 billion versus $7.18 billion year over year. The company generated cash flow from operations of $1.17 billion, higher than $959 million at fiscal-end 2010.
Guidance
CMS Energy affirmed its guidance for fiscal 2012 adjusted earnings in the range of $1.52-$1.55 per share. This is consistent with the company’s long-term plan of 5%-7% annual earnings growth.
Our Take
Jackson, Michigan-based CMS Energy is the holding company of Consumers Energy Company (Consumers) and CMS Enterprises Company (Enterprises). Consumers is an electric and gas utility company that provides electricity and natural gas to Michigan’s residents, and serves customers in all 68 counties in Michigan’s Lower Peninsula region. Enterprises, through its subsidiaries and equity investments, is engaged primarily in independent power production.
CMS Energy’s regulated electric power operations in Michigan generate a relatively stable and growing earnings stream. Overthe long term, the company presents a strong growth story, given its favorable regulatory policies in Michigan, higher rates, a robust balance sheet and incremental dividend. Thus, the company presently retains a short-term Zacks #2 Rank (Buy).
Over the longer run, we are concerned about the unfavorable macro backdrop, lower demand for electricity and pending regulatory cases. Therefore, we maintain our long-term Neutral recommendation on the stock. This is in line with its peers like American Electric Power Company (AEP) and Ameren Corporation (AEE).
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