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CMS Energy (CMS) to Report Q3 Earnings: Is a Beat in Store?

Zacks Equity Research
Updated

CMS Energy Corporation CMS is set to report third-quarter 2018 financial results on Oct 25, before the market opens. The company is expected to come up with a positive surprise this earnings season. Last reported quarter, the company delivered an earnings surprise of 17.07%.

What Our Quantitative Model Predicts

Our proven model conclusively shows that CMS Energy is likely to beat on earnings this reporting cycle. This is because the stock has both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: CMS Energy has an Earnings ESP of +2.11%. This is because the Most Accurate Estimate is pegged at 58 cents, higher than the Zacks Consensus Estimate of 57 cents per share. 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 #2, which increases the predictive power of ESP. Moreover, a positive ESP increases the odds of an earnings surprise. Thus, this combination makes estimate beat look more feasible.

Conversely, we caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

CMS Energy Corporation Price and EPS Surprise

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

Factors at Play

CMS Energy has been working to lower operation and maintenance (O&M) costs, which in turn, boost its margins. In fact, the company has been able to cut down on O&M costs coupled with a favorable weather condition, which has led to increased earnings per share in the first half of 2018 by 29% compared with the figure registered in the same period of 2017. The lower O&M cost has contributed nearly 10 cents per share in first-half 2018. We anticipate similar cost reductions in the company’s upcoming third-quarter results.

CMS Energy anticipates that the earlier approved electric rate case, is going to have a positive impact on third-quarter earnings. Also, CMS Energy’s service territory Michigan has experienced a strong building permit as well as GDP growth, which has driven higher demand for electricity. The company has achieved roughly 70 megawatts of new business in 2017 and anticipated to reach 100 megawatts in 2018.

The company focuses on capacity maximization, reliability improvement, clean power generation and infrastructural upgrade. It plans to spend $10.1 billion from 2018 through 2022. Moreover, CMS Energy anticipates that capital expenditures will help reducing the operation and maintenance by 2% between 2017 and 2019. The company aims to deploy around $8 billion to expand its natural gas system over 2017 to 2026 period. Also, the company is putting in continuous efforts to extend its renewable portfolio as well.

Other Stocks That Warrant a Look

Here are a few other stocks worth considering in the Utility – Electric Power space as our model shows that these too have the right combination of elements to beat on earnings in the upcoming releases. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Electric Power Company, Inc. AEP has an Earnings ESP of +2.46% and a Zacks Rank of 2. It is expected to report third-quarter 2018 earnings on Oct 25.

Ameren Corporation AEE has an Earnings ESP of +8.65% and is a Zacks #2 Ranked player. The company is anticipated to announce third-quarter 2018 earnings on Oct 31.

Xcel Energy Inc. XEL has an Earnings ESP of +0.34% and is a #2 Ranked player. It is estimated to release third-quarter 2018 earnings on Oct 25.

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Xcel Energy Inc. (XEL) : Free Stock Analysis Report
 
Ameren Corporation (AEE) : Free Stock Analysis Report
 
CMS Energy Corporation (CMS) : Free Stock Analysis Report
 
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
 
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