CMS Energy focuses on investments and expansion of renewable energy sources

CMS Energy Corporation (NYSE:CMS) is making consistent investments to strengthen its operations and benefit from delivering high-quality services to its customers. The company is also expanding its renewable energy portfolio, reducing coal-fired units to further promote clean energy.
However, the Zacks #3 (Hold)-ranked company faces adverse costs due to the closure of solid waste-to-coal-ash plants and commodity price fluctuations that work against it.

Tailwinds

CMS Energy is investing heavily in infrastructure renovations, infrastructure replacements, and clean energy production to enhance customer satisfaction and improve the resilience of its operations. CMS Energy plans to make $17 billion in capital expenditures between 2024 and 2028.
CMS Energy intends to install about 8,000 MW of solar generation by 2040. It also plans to deploy battery storage starting in 2024, with 75 MW of battery storage by 2027 and an additional 475 MW by 2040. The company also announced plans to build an 85 MW photovoltaic facility at the former DE Karn coal plant. The plant is expected to be operational by 2026. Such funding should help CMS Energy expand its renewable energy generation portfolio.
Like other utilities, CMS Energy is increasingly focused on increasing grid resiliency and reliability to support the industry’s smooth transition to cleaner energy, reduce outages for its customers, and protect its infrastructure from severe weather, thereby reducing operating costs. Decreased operating costs and increased availability of electricity on the systems will increase profits.

Contrary winds

As environmental regulations on reducing carbon dioxide emissions from electricity generation become more stringent, there is still cause for concern, despite the fact that the company’s utilities have implemented many pollution control measures. About 20% of its total energy mix was coal as of Dec. 31, 2023. CMS incurs significant expenses related to the development, operation and closure of solid waste-to-coal ash plants. To comply with these regulations, consumers predict the company will have to spend $238 million between 2024 and 2028.
CMS Energy does not always hedge all of its operations against commodity price fluctuations. Commodity price fluctuations could negatively impact CMS Energy’s operating results if the company has unhedged positions.

Actions to consider

Some of the better rated stocks in the same industry are CenterPoint Energy (NYSE:CNP), IDACORP, Inc. (NYSE:IDA) and Consolidated Edison (NYSE:ED), each currently has a Zacks Rating of #2 (Buy).

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 a 1% improvement from the prior-year period.

IDACORP has delivered an average earnings surprise of 6.81% over the trailing four quarters. The Zacks Consensus Estimate for IDA’s 2024 sales suggests a 1.1% increase from the prior-year period’s data.

Edison’s consolidated long-term earnings growth rate is 7.4%. The Zacks Consensus Estimate for ED’s 2024 sales is projecting a 3.1% improvement from the prior-year reported results.

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