On May 17, 2013, we upgraded the utility company,
CMS Energy Corporation
) to Outperform from Neutral based on its improved prospects as
well as solid first quarter 2013 results.
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Why the Upgrade?
On Apr 25, 2013, CMS Energy reported impressive first-quarter
earnings surpassing the Zacks Consensus Estimate by 15.2%. A
colder-than-normal weather spiked natural gas deliveries, driving
better-than-expected results in the reported quarter.
The company's regulated electric power operations in Mich.
generate a relatively stable and growing earnings stream. It
plans to use around $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 (AMI) and renewable (wind) investments.
With its strong pipeline of regulated investment opportunities
and favorable regulatory treatment, the company remains on track
to achieve its long-term earnings per share growth target of 5%
to 7% and annual rate base growth of 6% to 7%.
Again, a CMS Energy unit, Consumers Energy intends to build a 700
megawatt (MW) natural gas-fired power plant in Genesee County.
The estimated cost of the project is $750 million. Located in
Thetford Township, about 20 miles northeast of Flint, the major
new natural gas-fired power plant would be able to serve a
community of about 445,000 people post completion.
The company expects to begin construction in 2015 with the plant
coming online by 2017. The project will likely create 600
construction job opportunities. The natural gas power plant will
not only help the company to add profits but will also meet the
energy needs of Consumers Energy's customers over the next 20
years under the Balanced Energy Initiative program. The company
will use modern technology to meet the demand of its 1.8 million
Overall, the solid first-quarter results, a constructive Mich.
regulatory environment, along with the upcoming certificate of
need process for its proposed $750 million, 700 MW natural gas
combined-cycle plant will help CMS Energy maintain this momentum.
Other Stocks to Consider
CMS Energy currently retains a Zacks Rank #3 (Hold). Other
utility stocks worth considering include
CPFL Energia S.A.
Empresa Nacional de Electricidad S.A.
American Electric Power Co., Inc.
). While CPFL Energia and Empresa Nacional retain a Zacks Rank #1
(Strong Buy), American Electric carries a Zacks Rank #2