CMS Energy Rides on Investments and Renewable Expansion

CMS Energy Corporation CMS is making systematic investments to strengthen its operations and benefit by providing high-quality services to its customers. The company is also expanding its renewable generation portfolio, thereby reducing coal-generating units to further promote clean energy.
However, this Zacks Rank #3 (Hold) company is exposed to unfavorable costs associated with the shutdown of solid waste disposal facilities for coal ash and fluctuating commodity prices, which act as a headwind.

Tailwinds

CMS Energy is investing heavily in infrastructure renovations, infrastructure replacements and clean power production to increase customer satisfaction and improve the resiliency of its operation. CMS Energy plans to make capital expenditures worth $17 billion during the 2024-2028 period.
CMS Energy intends to install roughly 8,000 MW of solar production by 2040. It also plans to deploy battery storage, beginning in 2024, with 75 MW of energy storage by 2027 and an additional 475 MW by 2040. The company has also announced intentions to build an 85 MW solar array at the former D.E. Karn coal-generating facility. The facility is anticipated to be operational by 2026. Such measures should help CMS Energy expand its renewable energy generation portfolio.
Like other utility service providers, CMS Energy is increasingly focusing on making grids more resilient and reliable to support a smooth transition of the industry toward more clean energy adoption, reduce outages for their customers and protect their infrastructure against severe weather conditions, thereby reducing operating costs. A decline in operating costs and higher availability of electricity in its systems will enhance its earnings.

Headwinds

As environmental laws on reducing carbon emissions during electricity generation become more stringent, there is still cause for concern despite the fact that the company's power-generating facilities have implemented many pollution control measures. Approximately 20% of its overall power mix was made up of coal as of Dec 31, 2023. CMS incurs considerable expenditures associated with the development, operation and closure of solid waste disposal facilities for coal ash. In order to comply with these laws, consumers anticipate that the company will need to spend $238 million between 2024 and 2028.
CMS Energy does not always protect all of its activities against fluctuations in commodity prices. Variations in commodity prices might negatively impact CMS Energy's operational performance if the company has unhedged positions.

Stocks to Consider

Some better-ranked stocks from the same industry are CenterPoint Energy CNP, IDACORP, Inc. IDA and Consolidated Edison ED, each carrying a Zacks Rank #2 (Buy) at present.

CenterPoint Energy's long-term (three to five years) earnings growth rate is 7%. The Zacks Consensus Estimate for the company's 2024 sales indicates an improvement of 1% from the prior-year reported figure.

IDACORP delivered an average earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for IDA's 2024 sales suggests an increase of 1.1% from the prior-year reported figure.

Consolidated Edison's long-term earnings growth rate is 7.4%. The Zacks Consensus Estimate for ED's 2024 sales calls for an improvement of 3.1% from the prior-year reported figure.

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