We maintain our Neutral recommendation on
CMS Energy Corporation
). The company has regulated electric power operations in Michigan
that generate a relatively stable and growing earnings stream.
AMEREN CORP (AEE): Free Stock Analysis Report
CMS ENERGY (CMS): Free Stock Analysis Report
PEPCO HLDGS (POM): Free Stock Analysis Report
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CMS Energy plans to spend approximately $6.6 billion in the next
five years on upgrading its distribution system and generation
assets. With its robust 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%.
Also, the company's focus on cost management by reducing its
operations and maintaining costs by 4% this year and cutting down
the number of employees by 3% would boost its profits. Overall, the
company's balance sheet and its trend of rewarding shareholders by
returning a substantial portion of free cash flow through
incremental dividends over the past three years makes the stock
However, we remain concerned about the unfavorable macro backdrop,
lower demand for electricity and regulatory cases. This includes
lackluster electricity sales growth that could hamper the company's
earnings prospects. Going forward, lower demand due to a tepid
economy could significantly affect retail sales, as well as
industrial sales volume. According to the U.S. Bureau of Labor
Statistics, Michigan's unemployment rate in June 2012 was 8.6%
versus the national unemployment rate of 8.2%.
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
Jackson, Michigan-based CMS Energy Corporation (CMS) is the holding
company of Consumers Energy Company (Consumers) and CMS Enterprises
Company (Enterprises). Consumers is an electric and gas utility
company that provides electricity and natural gas to Michigan's
residents, and serves customers in all 68 counties of Michigan's
Lower Peninsula. Enterprises, through its subsidiaries and equity
investments, is engaged primarily in independent power production.
Some of its main competitors are
Pepco Holdings, Inc.