Michigan-based CMS Energy Corporation (CMS) announced adjusted earnings for second quarter 2011 of 26 cents per share, in line with the year-over-year figure as well as the Zacks Consensus Estimate.
The results reflect lower electric sales at the company’s Michigan utility, and costs to restore service to customers after a series of unusually severe spring storms. However, those costs were partially offset by slightly higher natural gas sales owing to cooler temperatures.
On a reported basis, the company clocked earnings of 38 cents per share versus 32 cents per share in the year-ago quarter. The variance between reported and adjusted earnings in the quarter was owing to one-time items, legacy issues associated with previously sold assets and certain other items that together totaled 12 cents.
Operational Performance
Operating revenue in the quarter under review was $1.4 billion, up 1.8% year over year. Results also exceeded the Zacks Consensus Estimate by $315 million. Operating expense however rose 7.3% year over year to $1.2 billion.
CMS Energy reported operating income of $207 million, down 3% from $262 million in the year-ago quarter. Overall, the company reported net income of $68 million, up from $65 million in the year-ago quarter.
Financial Position
CMS Energy ended the reported quarter with cash and cash equivalents of $994 million, higher than $536 million at the end of the year-ago quarter. Total debt, capital and finance leases were $7.3 billion compared with $6.5 billion in the prior-year period.
Guidance
CMS Energy reaffirmed its guidance for fiscal 2011 adjusted earnings of $1.44 per share, an estimated 6% rise from fiscal 2010 adjusted earnings of $1.36. This is consistent with the company's long-term plan of 5%–7% annual earnings growth.
Our Take
CMS Energy’s strong growth story is based on its stable electric and gas utility operations, favorable regulatory policies in Michigan, higher rates and a strong balance sheet.
But we believe that these positives are tempered by an unfavorable macro backdrop, lower demand for electricity and pending regulatory cases. The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.
Jackson, Michigan-based CMS Energy is the holding company of Consumers Energy Company (Consumers) and CMS Enterprises Company (Enterprises). The company mainly competes withAmerican Electric Power Co. Inc. (AEP) and Xcel Energy Inc. (XEL).
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