CMS Energy (CMS) Q4 Earnings: Stock to Pull a Surprise?

CMS Energy Corp. CMS is scheduled to release fourth-quarter 2016 results before the opening bell on Feb 2.

Last quarter, CMS Energy posted a positive earnings surprise of 16.67%. The company has outperformed the Zacks Consensus Estimate in three of the trailing four quarters, with the average positive surprise being 8.00%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

CMS Energy’s latest initiative – the Consumers Energy Way – focuses on improving customer experience by offering prompt services at low costs. The company is also making infrastructural investments in the fields of reliability, cost improvement, environmental mandates and other areas.

Currently, one of the company’s key strategies is to concentrate on reducing operation and maintenance (O&M) costs, which in turn will fund its capital investments. In particular, management expects cost reduction of about $60 million or 3% year over year in 2016 and 2017.

The company has maintained earnings growth projection in the 5–7% band for 2016, given normal weather conditions at the onset of the fourth quarter. The company expects to witness a year-over-year uptick of 13 cents in its earnings per share, assuming favorable weather conditions. Again, during the third-quarter earnings call, CMS Energy raised the low end of its 2016 adjusted earnings per share guidance to the range of $2.00–$2.02 from the prior guidance of $1.99–$2.02.

Weather will continue 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 fourth quarter, which should boost the demand for utility services and thus drive the top line.

For the fourth quarter, the Zacks Consensus Estimate for earnings is 28 cents, reflecting a decline of 25%, on revenues of $1.61 billion, implying a 6.4% year-over-year improvement.

CMS Energy Corporation Price and EPS Surprise

 

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

Earnings Whispers

Our proven model does not conclusively show that CMS Energy is likely to beat earnings in this quarter. That 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. But that is not the case here, as you will see below.

Zacks ESP: CMS Energy has an Earnings ESP of 0.00%. This is because the Most Accurate estimate of 28 cents stands in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though CMS Energy’s Zacks Rank #3 increases the predictive power of ESP, we need a positive ESP to be confident about an earnings beat.

Note that 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.

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 an earnings beat:

Entergy Corporation ETR is scheduled to release fourth-quarter results on Feb 15. The company has an earnings ESP of +15.38% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinnacle West Capital Corporation PNW is slated to report earnings on Feb 24. It has an Earnings ESP of +4.08% and a Zacks Rank #2.

Exelon Corporation EXC is expected to report earnings on Feb 8. It has an Earnings ESP of +2.27% and a Zacks Rank #2.

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CMS Energy Corporation (CMS): Free Stock Analysis Report
 
Pinnacle West Capital Corporation (PNW): Free Stock Analysis Report
 
Exelon Corporation (EXC): Free Stock Analysis Report
 
Entergy Corporation (ETR): Free Stock Analysis Report
 
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