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CMS Energy (CMS) Likely to Beat Q3 Earnings: Here's Why
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CMS Energy Corp. (CMS - Free Report) is scheduled to release third-quarter 2016 results before the opening bell on Oct 27.
In the preceding quarter, CMS Energy posted a positive earnings surprise of 28.57%. The company has outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with the average positive surprise being 5.87%.
Let’s see how things are shaping up prior to this announcement.
Our proven model shows that CMS Energy is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: CMS Energy has an Earnings ESP of +3.33%. That is because the Most Accurate estimate is 62 cents while the Zacks Consensus Estimate is pegged lower at 60 cents. This is a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: CMS Energy has a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings estimates.
Also, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
CMS Energy’s latest initiative – the Consumers Energy Way – focuses on improving customer experience by offering prompt services at a low cost. The company also continues to make infrastructural investments in the fields of reliability, cost improvement, environmental mandates and other areas.
Looking forward, the company maintains earnings growth projection in the 5%–7% band for 2016, with sultry weather conditions at the onset of the third quarter providing an impetus to this expectation. Moreover, the company expects to witness a year-over-year uptick of 13 cents in EPS in the second half of 2016, if weather conditions remain favorable.
Currently, one of the company’s vital strategies is to focus on reducing operation and maintenance (O&M) costs, which in turn will fund its capital investments. Particularly, management expects cost reduction of about $60 million or 3% year over year in 2016 and 2017.
Coming to the third-quarter highlights, CMS Energy started operations at its second solar power plant in Aug 2016, transforming 8.5 acres at Western Michigan University into a new source of renewable energy for Michigan. This is the energy provider’s second large-scale solar project in the state. The company also presented more than 1 million of its customers with new electric meters that will enable selection of customized billing dates. Without a doubt, these initiatives are aimed at improving customer experience.
Moreover, to boost its electric and gas businesses, the company plans to self implement its electric rate increase of $170 million on Sep 1, 2016. CMS Energy had also planned to file a $90 million gas case on Aug 1, 2016, 93% of which accounts for new investments to strengthen infrastructure and improve system capacity and deliverability.
For the third quarter, the Zacks Consensus Estimate for earnings is 57 cents a share, reflecting an increase of 7.55% year over year, while the consensus for revenues is pegged at $1.70 billion, implying a 14.27% year-over-year improvement.
Stocks to Consider
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:
Pattern Energy Group Inc. has an earnings ESP of +16.67% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 3.
Ameren Corporation (AEE - Free Report) has an earnings ESP of +2.90% and a Zacks Rank #2. It is expected to report earnings on Nov 4.
DTE Energy Company (DTE - Free Report) has an earnings ESP of +3.25% and a Zacks Rank #2. The company is slated to release results on Oct 26.
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CMS Energy (CMS) Likely to Beat Q3 Earnings: Here's Why
CMS Energy Corp. (CMS - Free Report) is scheduled to release third-quarter 2016 results before the opening bell on Oct 27.
In the preceding quarter, CMS Energy posted a positive earnings surprise of 28.57%. The company has outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with the average positive surprise being 5.87%.
Let’s see how things are shaping up prior to this announcement.
CMS ENERGY Price and EPS Surprise
CMS ENERGY Price and EPS Surprise | CMS ENERGY Quote
Why a Likely Positive Surprise?
Our proven model shows that CMS Energy is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: CMS Energy has an Earnings ESP of +3.33%. That is because the Most Accurate estimate is 62 cents while the Zacks Consensus Estimate is pegged lower at 60 cents. This is a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: CMS Energy has a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings estimates.
Also, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of CMS Energy’s Zacks Rank #1 and +3.33% ESP makes us reasonably certain of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Driving the Better-Than Expected Earnings?
CMS Energy’s latest initiative – the Consumers Energy Way – focuses on improving customer experience by offering prompt services at a low cost. The company also continues to make infrastructural investments in the fields of reliability, cost improvement, environmental mandates and other areas.
Looking forward, the company maintains earnings growth projection in the 5%–7% band for 2016, with sultry weather conditions at the onset of the third quarter providing an impetus to this expectation. Moreover, the company expects to witness a year-over-year uptick of 13 cents in EPS in the second half of 2016, if weather conditions remain favorable.
Currently, one of the company’s vital strategies is to focus on reducing operation and maintenance (O&M) costs, which in turn will fund its capital investments. Particularly, management expects cost reduction of about $60 million or 3% year over year in 2016 and 2017.
Coming to the third-quarter highlights, CMS Energy started operations at its second solar power plant in Aug 2016, transforming 8.5 acres at Western Michigan University into a new source of renewable energy for Michigan. This is the energy provider’s second large-scale solar project in the state. The company also presented more than 1 million of its customers with new electric meters that will enable selection of customized billing dates. Without a doubt, these initiatives are aimed at improving customer experience.
Moreover, to boost its electric and gas businesses, the company plans to self implement its electric rate increase of $170 million on Sep 1, 2016. CMS Energy had also planned to file a $90 million gas case on Aug 1, 2016, 93% of which accounts for new investments to strengthen infrastructure and improve system capacity and deliverability.
For the third quarter, the Zacks Consensus Estimate for earnings is 57 cents a share, reflecting an increase of 7.55% year over year, while the consensus for revenues is pegged at $1.70 billion, implying a 14.27% year-over-year improvement.
Stocks to Consider
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:
Pattern Energy Group Inc. has an earnings ESP of +16.67% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 3.
Ameren Corporation (AEE - Free Report) has an earnings ESP of +2.90% and a Zacks Rank #2. It is expected to report earnings on Nov 4.
DTE Energy Company (DTE - Free Report) has an earnings ESP of +3.25% and a Zacks Rank #2. The company is slated to release results on Oct 26.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>