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1. Company Snapshot

1.a. Company Description

CMS Energy Corporation operates as an energy company primarily in Michigan.The company operates through three segments: Electric Utility; Gas Utility; and Enterprises.The Electric Utility segment is involved in the generation, purchase, transmission, distribution, and sale of electricity.


This segment generates electricity through coal, wind, gas, renewable energy, oil, and nuclear sources.Its distribution system comprises 208 miles of high-voltage distribution overhead lines; 4 miles of high-voltage distribution underground lines; 4,428 miles of high-voltage distribution overhead lines; 19 miles of high-voltage distribution underground lines; 82,474 miles of electric distribution overhead lines; 9,395 miles of underground distribution lines; 1,093 substations; and 3 battery facilities.The Gas Utility segment engages in the purchase, transmission, storage, distribution, and sale of natural gas, which includes 2,392 miles of transmission lines; 15 gas storage fields; 28,065 miles of distribution mains; and 8 compressor stations.


The Enterprises segment is involved in the independent power production and marketing, including the development and operation of renewable generation.It serves 1.9 million electric and 1.8 million gas customers, including residential, commercial, and diversified industrial customers.The company was incorporated in 1987 and is headquartered in Jackson, Michigan.

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1.b. Last Insights on CMS

CMS Energy Corporation's recent performance was driven by strong Q4 earnings, beating estimates at $0.87 per share. The company's revenue, although missing Wall Street estimates, increased 2% from the year-ago level. Additionally, CMS Energy raised its 2025 EPS view, indicating a positive outlook. The company's solid Q3 results, with a 37.7% year-over-year increase in adjusted EPS, and its strong economic development pipeline in Michigan, are also contributing factors. With a BBB+ credit rating and a realistic path to high-single-digit annual adjusted EPS growth, CMS Energy presents an attractive opportunity for investors.

1.c. Company Highlights

2. CMS Energy Delivers Strong Q3 Earnings, Driven by Operational Excellence and Strategic Investments

CMS Energy reported adjusted net income of $797 million or $2.66 per share for the first nine months of the year, with EPS coming in at $0.93 for the quarter, beating analyst estimates of $0.86. Revenue growth is expected to continue, with analysts estimating a 3.9% increase next year. The company's financial performance has been driven by a combination of factors, including a warm summer in Michigan, which resulted in a $0.37 per share positive variance on a year-to-date basis, and rate relief net of investment costs, which contributed $0.28 per share of positive variance.

Publication Date: Nov -03

📋 Highlights
  • Renewable Energy Expansion:: Approved 8 GW solar and 2.8 GW wind projects through 2035, enhancing long-term customer investment confidence.
  • Q3 Financial Performance:: Adjusted net income of $797M ($2.66/share), driven by $0.37/share warm weather variance and $0.28/share rate relief benefits.
  • Capital Investment Pipeline:: $20B 5-year plan with $25B+ additional projects, focused on electric reliability, renewables, and gas infrastructure.
  • Data Center Load Growth:: 2 GW load from 3 data centers expected by 2030, supported by a pending large load tariff effective November 7.
  • Renewable Energy Strategy:: $10B capex plan with 50-50 owned/PPA mix, 1 GW under construction, and 9% return via competitive bidding and PPAs.

Operational Highlights

The company has made significant progress on its renewable energy plan, with a final order approving an additional 8 gigawatts of solar and 2.8 gigawatts of wind through 2035. This order provides further certainty and confidence for long-term customer investments, and is expected to drive growth in the company's electric business. As Garrick Rochow noted, "Our economic growth pipeline is robust, with projects in various stages of development, including data centers and manufacturing."

Growth Opportunities

CMS Energy is well-positioned for future growth, with a 5-year $20 billion customer investment plan and an additional $25 billion of potential investments supported by its Electric Reliability Roadmap, renewable energy plan, and Integrated Resource Plan. The company is also seeing significant interest from data centers, with up to 2 gigawatts of opportunity in the final stages, and expects to move forward with these projects in the coming months.

Valuation

Using the company's current valuation metrics, we can see that CMS Energy is trading at a P/E Ratio of 20.97, P/B Ratio of 1.79, and EV/EBITDA of 10.73. The company's ROE is 11.24%, indicating a relatively strong return on equity. With a dividend yield of 2.91%, CMS Energy offers an attractive income stream for investors. Overall, the company's valuation metrics suggest that it is reasonably priced, with a balance between growth and income.

Outlook

CMS Energy is confident in its guidance for the long term, with a goal of 7% to 8% earnings growth. The company's strong pipeline of new and expanding load, combined with its strategic investments in renewable energy and infrastructure, positions it for continued success in the years to come. As Rejji Hayes noted, "We plan conservatively and capitalize on opportunities as they arise, and this approach has enabled us to deliver on our operational and financial objectives, irrespective of the circumstances."

3. NewsRoom

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Bahl & Gaynor Inc. Grows Position in CMS Energy Corporation $CMS

Nov -22

Source: defenseworld.net

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CMS Gains Momentum From Grid Modernization and Renewable Investments

Nov -19

Source: zacks.com

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CMS Energy Declares Quarterly Dividend on Cumulative Redeemable Perpetual Preferred Stock

Nov -14

Source: prnewswire.com

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Consumers Energy, the Principal Subsidiary of CMS Energy, Declares Quarterly Dividend on Preferred Stock

Nov -14

Source: prnewswire.com

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Robert Bruce's Strategic Moves: AT&T Inc. Sees a -1.41% Portfolio Impact

Nov -13

Source: gurufocus.com

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STRATA Skin Sciences Announces CMS Recognition of Expanded CPT Codes for Inflammatory and Autoimmune Dermatologic Conditions with Company Anticipating Wider Excimer Adoption Ahead Of 2027 CPT Expansion

Nov -06

Source: globenewswire.com

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Spire Wealth Management Reduces Stock Holdings in CMS Energy Corporation $CMS

Nov -06

Source: defenseworld.net

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CMS Energy Prices Upsized Offering of $850 Million of 3.125% Convertible Senior Notes Due 2031

Nov -04

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.66%)

6. Segments

Electric Utility

Expected Growth: 3.5%

CMS Energy Corporation's Electric Utility segment growth is driven by increasing demand for electricity, investments in grid modernization and renewable energy, and rate base growth. Additionally, the company's focus on energy efficiency programs, infrastructure upgrades, and cost management initiatives contribute to its 3.5% growth rate.

Gas Utility

Expected Growth: 3.8%

CMS Energy Corporation's Gas Utility segment growth of 3.8% is driven by increasing demand for natural gas, infrastructure investments, and rate base growth. Additionally, favorable weather conditions, customer additions, and energy efficiency programs contribute to the segment's growth.

NorthStar Clean Energy

Expected Growth: 5.2%

NorthStar Clean Energy's 5.2% growth is driven by increasing demand for renewable energy, CMS Energy Corporation's strategic investments in clean energy infrastructure, and favorable government policies supporting the transition to a low-carbon economy. Additionally, declining renewable energy costs and growing corporate renewable energy procurement are also contributing to this growth.

7. Detailed Products

Electricity

Generation, transmission, and distribution of electricity to residential, commercial, and industrial customers

Natural Gas

Transmission, storage, and distribution of natural gas to residential, commercial, and industrial customers

Renewable Energy

Generation of electricity from wind, solar, and other renewable sources

Energy Efficiency

Providing energy-saving solutions and services to reduce energy consumption

Energy Storage

Providing energy storage solutions for residential, commercial, and industrial customers

8. CMS Energy Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for CMS Energy Corporation is medium due to the availability of alternative energy sources such as solar and wind power. However, the high cost of switching to these alternatives and the lack of infrastructure in some areas mitigate this threat.

Bargaining Power Of Customers

The bargaining power of customers for CMS Energy Corporation is low due to the lack of alternative energy providers in the region and the high cost of switching to alternative energy sources.

Bargaining Power Of Suppliers

The bargaining power of suppliers for CMS Energy Corporation is medium due to the availability of multiple suppliers of fuel and equipment. However, the high cost of switching to alternative suppliers and the lack of substitutes for certain equipment mitigate this power.

Threat Of New Entrants

The threat of new entrants for CMS Energy Corporation is low due to the high barriers to entry in the energy industry, including the need for significant capital investment and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry for CMS Energy Corporation is high due to the presence of multiple competitors in the energy industry, including other electric and gas utilities. The company must compete on price, service, and innovation to maintain its market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 67.46%
Debt Cost 4.86%
Equity Weight 32.54%
Equity Cost 5.81%
WACC 5.17%
Leverage 207.36%

11. Quality Control: CMS Energy Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Growth: 5.2

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Momentum: 5.5

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PPL

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Quality: 4.1

Yield: 7.0

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Quality: 4.9

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CMS Energy

A-Score: 5.7/10

Value: 4.1

Growth: 4.1

Quality: 4.2

Yield: 6.0

Momentum: 6.0

Volatility: 10.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

71.7$

Current Price

71.7$

Potential

-0.00%

Expected Cash-Flows