CMS Energy Corporation CMS will release its first-quarter 2015 financial results on Apr 23, 2015. In the previous quarter, the utility provider reported a negative earnings surprise of 2.78%. On an average, CMS Energy has posted a 5.01% positive surprise in the last four quarters. Let’s see how things are turning out for the first quarter.
Factors Affecting this Quarter
CMS Energy’s operations are subject to government’s environmental regulations. The company generates a significant share of electricity from coal. In 2014, electricity generated from coal-based assets by the company constituted 34% of total power.
The U.S. Environmental Protection Agency has proposed a new plan to control carbon pollution from power plants. The aim is to reduce emissions by 30% by 2030 from 2005 levels. If the proposal comes into effect, CMS Energy will be forced to invest in pollution-control measures at its power generating facilities, thereby increasing operating costs.
As per the U.S. Energy Information Administration published on Apr 7, 2015, the first quarter of 2015 is expected to witness a 2.3% drop in retail residential electricity sales from the prior-year quarter due to a mild winter. This might impact CMS Energy’s first-quarter 2015 performance negatively as its business segment generates a considerable share of revenues from residential customers.
Earnings Whispers?
Our proven model shows that CMS Energy is likely to miss earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.08%. This is because the Most Accurate estimate is pegged at 63 cents while the Zacks Consensus Estimate stands slightly higher at 65 cents.
Zacks Rank: CMS Energy’s Zacks Rank #4 (Sell), which when combined with a negative ESP, makes a positive earnings surprise call highly unlikely.
We as it is caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the same sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
TECO Energy, Inc. TE has an earnings ESP of +3.70% and a Zacks Rank #2.
Exelon Corporation EXC has an earnings ESP of +1.54% and a Zacks Rank #3.
Edison International EIX has an earnings ESP of + 1.27% and a Zacks Rank #3.
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