CNL Cleco Corp.

Michigan-based CMS Energy Corporation (CMS) announced adjusted earnings for the first quarter 2011 of 51 cents per share, compared with 38 cents in the year-ago quarter. The results of the company were higher than the Zacks Consensus Estimate of 44 cents by 7 cents. Performance in the reported quarter was boosted by a colder winter in Michigan.

On a reported basis, the company clocked earnings of 52 cents per share versus 34 cents in the year-ago quarter. The variance of a penny between earnings on reported and adjusted basis in the reported quarter was owing to the one-time items of income of a penny from discontinued operations.

Operational Performance

Operating revenue of CMS Energy in the quarter under review grossed $2.1 billion, up 4.5% year over year.  Results were however lower than the Zacks Consensus Estimate by $60 million. Operating expense in the quarter increased 1.2% year over year to $1.7 billion.

CMS Energy reported operating income of $306 million, 28% higher than $239 million in the year-ago quarter. Overall the company reported net income of $135 million compared to net income of $85 million in the year-ago quarter.

Financial Position

CMS Energy ended the reported quarter with cash and cash equivalents of $801 million, higher than $755 million at the end of the year-ago quarter. Total debt, capital and finance leases remained flat at $7.2 billion year-over-year. The company generated cash flow from operations of $841 million, higher than $657 million in the year-ago quarter.

Guidance

CMS Energy’s regulated electric power operations in Michigan generate a relatively stable earnings stream. Thus growth prospects look robust for CMS Energy with a constructive regulatory environment along with steady recovery in the Michigan economy.

CMS Energy reaffirmed its guidance for fiscal 2011 adjusted earnings of $1.44 per share.  That's an increase of about 6% from fiscal 2010 adjusted earnings of $1.36. This is consistent with the company's long-term plan of 5%–7% annual earnings growth.

CMS Energy is making substantial investments in renewable energy, environmental quality, energy efficiency and other areas to continue to provide customers with safe, reliable and affordable service. The company also recently updated its renewable energy plan reaffirming the company's commitment to meet Michigan’s 10% renewable energy standard.

The company already is the largest supplier of renewable energy in Michigan. As of now 5% of the power supplied to its 1.8 million electric customers comes from renewable sources. Going forward the company plans to invest more than $6 billion in its utility operations through 2015, making it one of the largest investors in Michigan.

We maintain our “Neutral” rating on CMS Energy. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no directional pressure on the shares over the near term. In the near-term we would advise investors to focus on its Zacks #2 Rank (short-term Buy rating) peers like ALLETE Inc. (ALE) and Cleco Corporation (CNL).

 
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