CMS Energy Inc. is slated to release its second quarter 2013 earnings results before the market opens on Jul 25. Last quarter, the company reported a positive earnings surprise of 15.22%. Let’s see how things are shaping up for the utility service provider for this announcement.
Factors to Consider This Quarter
The harsh winter weather primarily drove CMS Energy’s earnings in the first quarter of 2013. The company’s earnings, however, could take a hit in 2Q owing to the fragile economic condition in its main service territory of Michigan.
Nevertheless, its electric service reliability improved 20% in the second quarter which resulted in smooth power services. This will certainly act as a catalyst to CMS Energy’s earnings. Moreover, the company commenced its gas purchase agreement in early Apr 2013 with BreitBurn Operating L.P. which would support CMS Energy’s supply commitments to a wide customer base.
Furthermore, its focus on achieving an effective operational mix will prove to be a critical income driver. CMS Energy’s renewable development initiatives, as evident from the Cross Winds Energy program in Tuscola County, will help to spur growth.
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 Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: The Most Accurate estimate stands at 34 cents while the Zacks Consensus Estimate is lower at 35 cents. This comes to a difference of -2.86%.
Zacks Rank #3 (Hold): CMS Energy’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. This combined with an ESP of -2.86% makes surprise prediction difficult. We 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.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Integrys Energy Group Inc. , Earnings ESP of +9.38% and a Zacks Rank #1 (Strong Buy).
National Gas Fuel Company , Earnings ESP of +3.08% and a Zacks Rank #2 (Buy).
Black Hills Corp. , Earnings ESP of +2.33% and a Zacks Rank #3 (Hold).