CMS Gains Momentum From Grid Modernization and Renewable Investments

CMS Energy Corporation’s CMS robust investment in infrastructure upgrades and renewable project is expected to continue to boost its overall performance. The company also benefits from stable and regulated utility operations in Michigan. 

However, this Zacks Rank #3 (Hold) company faces risks related to unfavorable expenditures related to closure of solid waste disposal facilities for coal ash.

Factors Acting in Favor of CMS

CMS Energy benefits from a favorable regulatory environment that supports financial performance. More than 95% of the company's earnings come from its regulated electric and gas utilities, which provide a low-risk, stable revenue stream.

CMS Energy is investing heftily in infrastructure upgrades, replacements of old infrastructures and clean power generation to improve customer reliability and resiliency of its infrastructure. To achieve this, the company plans to make capital expenditures worth $20 billion during 2025-2029. Infrastructure upgrades help CMS to strengthen grid, enabling it to better withstand extreme weather conditions and improve its service reliability.

With increased social awareness about renewable energy expansion, economic and environmental, social, and governance (ESG) incentives are available for utility companies like CMS Energy. Therefore, CMS has been rapidly expanding its renewable generation portfolio in recent times. It plans to add 9 GW of solar and 4 GW of wind to its generation portfolio over the next two decades. It also plans to add more than 850 MW of battery storage by 2030.

Challenges Faced by CMS

Although the company has implemented multiple pollution-control measures across its power-generation fleet, tightening environmental regulations on carbon emissions continue to pose a significant challenge. As of Dec. 31, 2024, coal accounted for about 20% of its total electric generation mix. 

The company incurs significant costs related to the construction, operation and closure of solid waste disposal facilities for coal ash. Consumers had earlier estimated that the company will have to incur capital expenditures of $240 million from 2025 through 2029 to comply with these regulations. This might adversely impact CMS Energy’s bottom line.

CMS’ Share Price Performance

In the past three months, shares of the company have risen 1.7% compared with the industry’s 8.5% growth.

Stocks to Consider

Some better-ranked stocks from the same industry are NiSource NI, Alliant Energy LNT and Evergy EVRG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NiSource’s long-term (three to five years) earnings growth rate is 7.97%. The Zacks Consensus Estimate for NI’s 2025 EPS implies an improvement of 7.4% from that recorded in 2024.

LNT’s long-term earnings growth rate is 6.57%. The company delivered an average earnings surprise of 13.5% in the last four quarters.

EVRG’s long-term earnings growth rate is 5.39%. The Zacks Consensus Estimate for EVRG’s 2025 EPS implies an improvement of 5.3% from that recorded in 2024.

 

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This article originally published on Zacks Investment Research (zacks.com).

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