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Tickers in this Article: AEE, CMS
Jackson, Michigan-based CMS Energy Corporation (CMS) is expected to release its third-quarter 2012 results on October 25, 2012. The Zacks Consensus Estimate for the third quarter of 2012 is 61 cents per share (year-over-year increase of 14.62%) on revenues of $1,827 million (year-over-year increase of 24.8%).

Second-quarter 2012, a Synopsis

CMS Energy Corporation announced adjusted earnings of 40 cents per share for the second quarter of 2012, beating the Zacks Consensus Estimate of 38 cents. The results were also higher than the year-ago earnings of 26 cents per share. On a reported basis, the company recorded earnings of 37 cents per share versus 38 cents in the year-ago quarter. In the reported quarter, the variance of 3 cents between earnings on a reported and adjusted basis is attributable to the effect of a voluntary employee separation program that was implemented in the same period.

Operating revenue of CMS Energy in the quarter under review grossed $1.33 billion, down 2.3% year over year.  Results were also lower than the Zacks Consensus Estimate by $214 million.

Operating expenses in the quarter fell $1.07 billion from $1.16 billion year over year. CMS Energy reported operating income of $260 million versus $207 million in the year-ago quarter. Overall, the company reported net income of $100 million, flat with the year-ago quarter.

Read our full coverage on this earnings report: CMS Energy Beats EPS, Misses Rev.

Guidance for 2012

CMS Energy expects adjusted earnings for full-year 2012 in the range of $1.52-$1.55 per share. This is consistent with the company's long-term plan of 5%-7% annual earnings growth.

Zacks Consensus                                             

The analysts covered by Zacks expect CMS Energy to post third-quarter 2012 earnings of 61 cents per share, higher than 53 cents delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 58 cents and 62 cents a share.

For 2012, the Zacks Consensus Estimate stood at $1.55 per share, higher than its prior-year earnings of $1.46 per share. The current Zacks Estimate ranges between $1.53 and $1.60 per share.

Estimate Revisions Trend

Agreement

We do not see any change for the third quarter as well as full year 2012. None of the estimates moved upward or downward for the last 7 days or 30 days for both third quarter as well as full year 2012.

The analysts seem to be neutral for both the current quarter and for full year 2012.

Magnitude

The Zacks Consensus Estimate for the third quarter 2012 remained stagnant at 61 cents over the last 30 days. For full-year 2012 also, the consensus estimate remained static at $1.55 for the 30 day period.

Surprise History

With respect to earnings surprises, CMS Energy Corporation has topped the Zacks Consensus Estimate in three of the last four quarters. The average surprise over the last four quarter remained at positive 2.68%. The earnings beat in December 2011 was the highest at 6.67%.

Our Recommendation

CMS Energy's regulated electric power operations in Michigan generate a relatively stable and growing earnings stream. 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% and annual rate base growth of 6% to 7%. CMS Energy is focusing on cost management. The company intends to reduce its operations and maintenance costs by 4% this year and cut down the number of employees by 3%. This will definitely help the company to boost its profits.

However, we remain concerned about the unfavorable macro backdrop, economic condition in Michigan, and regulatory cases. Like its peer, Ameren Corporation (AEE) CMS Energy presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

CMS Energy Corporation is the holding company of Consumers Energy Company (Consumers) and CMS Enterprises Company (Enterprises). Consumers is a 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, are engaged primarily in independent power production.

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