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CMS Energy (CMS) to Post Q2 Earnings: What's in the Cards?

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CMS Energy Corporation (CMS - Free Report) is set to report second-quarter 2017 financial results on Jul 28, before the market opens.

Last quarter, the company posted an earnings surprise of 9.23%. Notably, it surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 13.62%.

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, the company has been strongly engaged in reducing its 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 costs by more than 3% for each of the last three years. It cut down costs by an impressive 6.5% last year, much better than the initial expectation. We anticipate similar cost reductions in the company’s upcoming second-quarter results.

Furthermore, improvement has been witnessed in CMS Energy’s latest initiative, the Consumers Energy Way. The strategy focuses on bettering customer experience by offering prompt services at low costs. As of the end of the first quarter, it has saved more than $0.5 billion for the company. We expect to get further updates on this project’s improvements, once the second-quarter results release.

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

For the second quarter, the Zacks Consensus Estimate for earnings is 42 cents, reflecting a decline of 7.22%, on revenues of $1.36 billion, which implies a 1.13 % decrease year over year.

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 an Earnings ESP of -4.76%. This is because the Most Accurate estimate is pegged at 39 cents, lower than the Zacks Consensus Estimate of 41 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 4.76% 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 - Free Report) has an Earnings ESP of +10.00% and carries a Zacks Rank #2. It is slated to report second-quarter 2017 results on Aug 2.

Pattern Energy Group Inc. (PEGI - Free Report) has an Earnings ESP of +23.08% and holds a Zacks Rank #2. It is slated to report second-quarter 2017 results on Aug 4.You can see the complete list of today’s Zacks #1 Rank stocks here.

The AES Corporation (AES - Free Report) has an Earnings ESP of +20.00% and holds a Zacks Rank #2. It is slated to report second-quarter 2017 results on Aug 8.

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