Weak Quarter for CMS Energy - Analyst Blog
April 26 2012 - 12:00PM
Zacks
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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