Scotiabank raises CMS Energy stock target to $81, keeps top rating

On Friday, Scotiabank (TSX:BNS) analyst Andrew Weisel increased the price target on CMS Energy (NYSE:CMS) to $81.00, up from the previous $77.00, while maintaining a Sector Outperform rating on the stock. Currently trading at $74.14, InvestingPro analysis suggests the stock is undervalued. Weisel expressed continued confidence in CMS Energy, citing it among the top picks due to its superior earnings per share (EPS) growth rate, which stands at approximately 7.5%, compared to the 6.5% average of its peers. The company’s low-risk profile and consistent performance were also noted as key factors, supported by its market capitalization of $22.18 billion and year-to-date return of 12.11%.[Access InvestingPro for exclusive insights, including 8 additional ProTips and a comprehensive analysis of CMS Energy’s financial health.]

Weisel highlighted the recent electric rate case in Michigan as evidence of a favorable regulatory environment, and he mentioned that the gas rate case is advancing well. Despite challenging late winter storms, CMS Energy’s response has improved significantly compared to previous years. Weisel believes that the company’s cost-cutting measures should help mitigate the financial effects of these storms. Furthermore, a unique deferred accounting request could offer additional flexibility and underscore the appeal of Michigan’s regulatory setting. InvestingPro data shows the company operates with moderate debt levels and maintains strong liquidity, with current assets exceeding short-term obligations at a ratio of 1.45.

The analyst also pointed out that CMS Energy is well-positioned to handle the impact of tariffs, with 90% of its capital expenditures being sourced domestically. This factor contributes to the company’s stability and reduces exposure to international trade volatility.

Weisel’s revised valuation of CMS Energy’s stock reflects a 20% premium on the projected 2027 earnings, up from the 15% premium previously assigned. This adjustment is based on an anchor price-to-earnings (P/E) ratio of 16.0 times, while the current P/E ratio stands at 21.74. The upgrade follows CMS’s first-quarter earnings report for 2025, where they posted an EPS of $1.02, surpassing both Scotiabank’s estimate of $0.99 and the consensus estimate of $1.01. The company has maintained dividend payments for 19 consecutive years, demonstrating consistent shareholder returns.[Discover more about CMS Energy’s valuation metrics and access the comprehensive Pro Research Report, available exclusively on InvestingPro.]

In other recent news, CMS Energy reported its Q1 2025 earnings, with an adjusted earnings per share (EPS) of $1.02, which fell short of the forecasted $1.10. Despite this earnings miss, the company reaffirmed its full-year EPS guidance of $3.54 to $3.60, reflecting confidence in its strategic initiatives. Revenue for the quarter was reported at $2.45 billion, showcasing strong top-line performance. CMS Energy plans significant utility investments totaling $3.7 billion in 2025, focusing on renewable energy and data center projects. The company highlighted effective storm response and operational improvements, which were well-received by customers and policymakers. Analysts from Evercore ISI and Jefferies inquired about various aspects of the company’s operations, including storm cost management and data center development, during the earnings call. The company addressed these concerns by emphasizing its strategic focus and adaptability. Additionally, CMS Energy has been proactive in securing tax credits and managing costs related to renewable projects, as noted in discussions with analysts from Evercore ISI and Wolfe Research.

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