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On Monday, BMO Capital Markets maintained its Outperform rating on CMS Energy (NYSE:CMS) and increased the stock’s price target to $80 from $73. The adjustment follows a favorable final order from the Michigan Public Service Commission (MPSC) on Friday. The utility company, with a market capitalization of $22 billion, has seen its stock rise 11% year-to-date and is currently trading near its 52-week high of $75.06. According to InvestingPro analysis, CMS Energy generally trades with low price volatility, making it an interesting consideration for stability-focused investors.
The MPSC’s final decision in the Consumer’s electric rate case granted CMS Energy a $176 million revenue boost, which includes a $22 million distribution deferral surcharge. Notably, the approved return on equity (ROE) was set at 9.90%, which is higher than the figures proposed by the MPSC staff and the Administrative Law Judge (ALJ). The equity ratio was determined to be 50.00%, surpassing the MPSC staff’s recommendation and aligning with the ALJ’s judgement. Additionally, the rate base was established at $14.86 billion, exceeding the estimates of both the MPSC staff and the ALJ. The company has demonstrated strong financial stability, maintaining dividend payments for 19 consecutive years with a current yield of 2.95%.
BMO Capital’s analyst highlighted the MPSC’s ruling as indicative of Michigan’s cooperative regulatory framework. The revenue increase authorized by the final order was described as being between the MPSC staff and ALJ’s positions, aligning with what investors had anticipated. This development is seen as a positive and constructive outcome for CMS Energy.
The analyst at BMO Capital expressed continued confidence in the stock by reiterating the Outperform rating. The sum-of-the-parts/marked-to-market (SOTP/M-T-M) target price has been revised to $80, reflecting the analyst’s optimistic view of CMS Energy’s prospects following the MPSC’s decision.
In other recent news, CMS Energy reported fourth-quarter earnings that aligned with analyst expectations, posting an adjusted earnings per share of $0.87. However, the company’s revenue fell short, coming in at $1.99 billion compared to the anticipated $2.11 billion. Despite this, CMS Energy raised its earnings guidance for 2025, projecting adjusted earnings per share between $3.54 and $3.60, slightly above the previous guidance. In another development, CMS Energy’s Board of Directors approved an increase in the quarterly dividend rate to 54.25 cents per share, up from 51.50 cents, resulting in an annualized yield of approximately 3.2 percent.
Barclays (LON:BARC) analyst Nicholas Campanella upgraded CMS Energy’s stock rating from Equalweight to Overweight, adjusting the price target to $75.00 from $68.00. This upgrade was due to potential earnings growth from energy efficiency and renewable energy initiatives in Michigan. The analyst highlighted that these initiatives could lead to CMS Energy over-earning its allowed return on equity, contributing an estimated $60 million per year to earnings. Additionally, CMS Energy reaffirmed its long-term adjusted EPS growth target of 6% to 8%, expressing confidence towards the higher end of this range. The company also emphasized its operational improvements, such as restoring power to over 93% of customers within 24 hours and securing over 360 megawatts of new load through economic development efforts.
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