Back to top

Analyst Blog

Consumers Energy, Michigan's largest gas utility and a subsidiary of CMS Energy Corp. (CMS - Analyst Report), has lowered its fuel costs by 44% over the past five years, thereby saving $260 million for customers this winter compared to five years ago. An average residential customer is expected to save $50 due to lower heating costs this winter.

On the whole, the bill of an average residential customer is down $200 this heating season compared to five years ago as a result of this initiative taken by the company.

Consumers Energy delivers natural gas service to 1.7 million customers in 45 counties in Michigan's Lower Peninsula. It aims at saving additional money for customers by making their homes more energy efficient.

The company is working to lower its costs as a part of its Promise to Michigan program that aims at providing affordable and reliable services to its customers. This is not the first time that it has lowered its fuel costs. In Mar 2013, Consumers Energy had declared to curtail its natural gas fuel costs by 15%. The company indicated that these efforts to trim gas fuel costs will assist Michigan families and businesses to save approximately $200 million by 2014.

Albeit natural gas prices have trended down in recent times, the cuts employed by CMS Energy are impressive by any standard. This has only been possible as Consumers Energy is uniquely positioned to take advantage of lower-priced natural gas due to its massive storage system.

Also, the company continues to invest in its natural gas infrastructure to take advantage of lower-cost supplies, benefiting customers now and in the future. Its projects include expansion of gas compressor stations and replacement of natural gas pipelines.

CMS Energy plans to spend approximately $6.5 billion to $7.0 billion in the next five years (2013 – 2017) on upgrading its distribution system and generation assets through projects such as advanced metering infrastructure and renewable investments. Consumers Energy intends to build a 700 MW new natural gas-fired power plant in Genesee County.

With its robust pipeline of regulated investment opportunities and favorable regulatory treatment, the company remains on track to achieve its long-term EPS growth target of 5% to 7% and annual rate base growth of 6% to 7%.

However, in the near term, lackluster electricity sales growth is hampering the earnings prospects of the company. Lower demand due to a tepid economy has significantly affected retail sales, as well as industrial sales volume. Also, pending regulatory cases are a concern.

The Zacks Consensus Estimate for the third quarter 2013 is 55 cents, down a projected 2.68% year over year.

CMS Energy presently has a short-term Zacks Rank #4 (Sell). Stocks that are worth considering in the space are Alliant Energy Corp. (LNT - Snapshot Report), Cleco Corp. (CNL - Snapshot Report) and Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report), all with a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%