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Weak Quarter for CMS Energy - Analyst Blog

Date : 04/26/2012 @ 12:00PM
Source : Zacks
Stock : Ameren Corp. (AEE)
Quote : 40.12  0.04 (0.10%) @ 8:00PM
Ameren share price Chart

Weak Quarter for CMS Energy - Analyst Blog

Michigan-based CMS Energy Corporation (CMS) announced adjusted earnings of 37 cents per share for the first quarter 2012, just missing the Zacks Consensus Estimate of 39 cents. However, the results were below the year-ago earnings of 51 cents per share. On a reported basis, the company recorded earnings of 25 cents per share versus 52 cents in the year-ago quarter.

The variance of 12 cents between earnings on reported and adjusted basis in the reported quarter was owing to the one-time items; Electric Decoupling Court Order charge of 14 cents and restructuring costs of a penny, partially offset by income of 3 cents from discontinued operations.

Operational Performance

Operating revenue of CMS Energy in the quarter under review grossed $1.74 billion, down 15.2% year over year.  Results were also lower than the Zacks Consensus Estimate by $440 million.

Operating expense in the quarter fell to $1.56 billion from $1.75 billion year over year. CMS Energy reported operating income of $188 million versus $306 million in the year-ago quarter. Overall, the company reported net income of $67 million compared with $135 million in the year-ago quarter.

Financial Position

CMS Energy ended the quarter with cash and cash equivalents of $358 million compared with $161 million at the end of fiscal 2011. Total debt, capital and finance leases narrowed down to $7.03 billion from $7.09 billion at the end of fiscal 2011. In the first quarter of 2012, the company generated cash flow from operations of $635 million compared with $841 million at the end of the year-ago period.

Guidance

CMS Energy reaffirmed 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).

In 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).


 
AMEREN CORP (AEE): Free Stock Analysis Report
 
AMER ELEC PWR (AEP): Free Stock Analysis Report
 
CMS ENERGY (CMS): Free Stock Analysis Report
 
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