What's in Store for CMS Energy Corp (CMS) in Q1 Earnings?

CMS Energy Corporation CMS is set to report first-quarter 2017 financial results on May 1, before the market opens.

Last quarter, the company posted an earnings surprise of 0.00%. However, the company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 8.00%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

CMS Energy’s regulated electric power operations in Michigan generate a relatively stable and growing earnings stream. Of late, one of the key strategies for the company has been to reduce operation and maintenance (O&M) costs, which in turn will fund capital investments.

In fact, the company has been able to cut down O&M cost by 6.5% last year, much better than initial expectation. We anticipate witnessing similar cost reductions in the company’s upcoming first-quarter results.

Further, improvement have been witnessed in CMS Energy’s latest initiative – the Consumers Energy Way, which focuses on improving customer experience by offering prompt services at low costs. Toward this end, management expects to observe enhanced improvements in this project in the first quarter and beyond.

During fourth-quarter earnings call, CMS Energy announced that it expects the final verdict for its electric rate case to be out around the middle of the first quarter. Notably, this final order is related to the annual rate hike proposal requested by the company earlier. If approved, this might hamper the company’s earnings growth rate initially.

Weather continues to play an important role in the company’s to-be-reported quarter. CMS Energy’s service territories have witnessed warmer-than-normal temperatures during the first quarter. This will result in lower household expenditure on heating, which might adversely impact revenues.

For the first quarter, the Zacks Consensus Estimate for earnings is 65 cents, reflecting an improvement of 9.75%, on revenues of $1.82 billion, implying an increase of 1.05% year over year.

CMS Energy Corporation Price and EPS Surprise

 

CMS Energy Corporation Price and EPS Surprise | CMS Energy Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that CMS Energy is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP: CMS Energy has Earnings ESP of -6.15%. This is because the Most Accurate estimate is pegged at 61 cents, lower than the Zacks Consensus Estimate of 65 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CMS Energy carries a Zacks Rank #3, which increases the predictive power of ESP. However, the negative Earnings ESP of 6.15% makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

NiSource, Inc. NI will report first-quarter 2017 results on May 3. The company has an Earnings ESP of +3.08% and a Zacks Rank #2.

Pattern Energy Group, Inc. PEGI has an Earnings ESP of +300% and a Zacks Rank #3. The company is expected to report first-quarter 2017 results on May 8.You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinnacle West Capital Corporation PNW has an Earnings ESP of +7.14% and a Zacks Rank #3. The company is slated to release first-quarter 2017 results on May 2.

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CMS Energy Corporation (CMS): Free Stock Analysis Report
 
Pinnacle West Capital Corporation (PNW): Free Stock Analysis Report
 
NiSource, Inc (NI): Free Stock Analysis Report
 
Pattern Energy Group Inc. (PEGI): Free Stock Analysis Report
 
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