Group 1 - CMS Energy Corporation's preferred stock, CMS.PR.C, has experienced a 17% rally since its bottom shortly after Liberation Day, yet it still offers an attractive dividend yield of 5.5% [1]

Despite its 17% rally off its bottom shortly after the Liberation Day, the preferred stock, CMS.PR.C , of CMS Energy Corporation (NYSE: CMS ), is still offering an enticing dividend yield of 5.5% . CMS EnergyI am a chemical engineer with a MS in Food Technology and Economics, and a MENSA member. I am the author of the book "Investing in Stocks and Bonds: The Early Retirement Project" (2024):I am also the author of the book "Mental Math: How to perform math calculations in your mind".I am also the author of ...

Core Viewpoint - CMS Energy Corporation is enhancing its operations through strategic investments while focusing on renewable energy and phasing out coal generation [1][4] Group 1: Strategic Investments and Goals - CMS Energy plans to invest $20 billion in capital expenditures from 2025 to 2029 to modernize infrastructure and improve customer satisfaction [2][9] - The company aims to deploy nearly 3,000 line sensors, 100 automatic transfer reclosers, and 1,200 iron utility poles to enhance electric reliability and reduce outages [3] - CMS Energy is expanding its renewable energy portfolio by adding 9 gigawatts (GW) of solar and 2.8 GW of wind capacity between 2025 and 2045 [3][9] Group 2: Transition from Coal - The company is reducing its coal-generating capacity to lower emissions, with plans to retire the J.H. Campbell coal unit in 2025 and the D.E. Karn oil- and gas-fired unit in 2031 [4] - CMS Energy aims to eliminate coal-fueled generation by 2025 [4] Group 3: Energy Storage and Grid Reliability - Through its subsidiary Consumers Energy, CMS is investing in energy storage projects, securing agreements for 700 MW of capacity from battery storage facilities in Michigan, expected to begin operations by 2028 [5] Group 4: Financial Position and Risks - As of June 30, 2025, CMS Energy had $0.93 billion in cash and equivalents, $16.92 billion in long-term debt, and $1.13 billion in current debt, indicating a weak solvency position [7] - The company faces significant costs related to coal ash disposal, with an expected expenditure of $237 million between 2025 and 2029 to comply with regulations [6] Group 5: Stock Performance - In the past three months, CMS shares have increased by 5%, outperforming the industry's growth of 1.7% [8]

Core Insights - CMS Energy reported strong second-quarter 2025 results, with adjusted EPS of $0.71, exceeding analyst estimates by $0.03, and GAAP revenue of $1,838 million, surpassing expectations by $100.75 million [1][5][11] - The company demonstrated healthy year-over-year growth in both revenue and adjusted EPS, with revenue increasing by 14.4% compared to Q2 2024 [2][5] - Significant storm-related expenses were incurred, yet the company maintained its full-year guidance, showcasing its ability to manage unexpected costs [1][8] Financial Performance - Adjusted EPS (Non-GAAP) for Q2 2025 was $0.71, a 7.6% increase from Q2 2024's $0.66 [2] - GAAP revenue reached $1,838 million, up 14.4% from $1,607 million in Q2 2024 [2] - Operating income rose to $317 million, a 12.0% increase year-over-year [2] Regulatory Environment - CMS Energy received approval for approximately 65% of its requested electric rate increases in March 2025, which will support future infrastructure investments [6] - The company is navigating Michigan's Clean Energy Plan and aims to retire all coal units by the end of 2025 [4][7] Operational Developments - The company is experiencing increased demand for data centers, with a new agreement potentially adding up to 1 gigawatt of electricity load [7] - Operational efficiency initiatives, such as the "CE Way" program, have led to meaningful cost savings despite facing significant storm-related expenses [8] Future Outlook - CMS Energy reaffirmed its full-year 2025 adjusted EPS guidance range of $3.54 to $3.60, with a long-term annual adjusted EPS growth target of 6-8% [11] - The company is focused on high capital investment needs to comply with updated clean energy mandates and is preparing for key regulatory decisions in the coming months [12]

Core Insights - CMS Energy Corporation reported Q2 2025 EPS of 71 cents, exceeding the Zacks Consensus Estimate of 67 cents by 6% and reflecting a 7.6% increase from 66 cents in the prior-year quarter [1][8] - Operating revenues reached $1.84 billion, surpassing the Zacks Consensus Estimate of $1.69 billion by 9% and showing a 14.4% increase from $1.61 billion in the same quarter last year [2][8] - The company reaffirmed its 2025 adjusted EPS guidance in the range of $3.54-$3.60, with a long-term adjusted EPS growth expectation of 6-8% [5][8] Financial Performance - CMS reported operating expenses of $1.52 billion, a 14.9% increase from the previous year's figure [3] - Net income for the quarter was $193 million, up from $182 million in the year-ago quarter, while interest charges totaled $199 million, reflecting a 15% increase year-over-year [3] - Cash and cash equivalents stood at $844 million as of June 30, 2025, compared to $103 million at the end of 2024, while total debt increased to $17.40 billion from $15.87 billion [4] Market Position - CMS Energy currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook in the market [6]

Core Insights - CMS Energy reported $1.84 billion in revenue for the quarter ended June 2025, marking a year-over-year increase of 14.4% and exceeding the Zacks Consensus Estimate of $1.69 billion by 8.94% [1] - The company achieved an EPS of $0.71, up from $0.66 a year ago, with a surprise of 5.97% compared to the consensus estimate of $0.67 [1] Revenue Performance - NorthStar Clean Energy generated operating revenue of $92 million, surpassing the three-analyst average estimate of $89.91 million, reflecting a year-over-year change of 24.3% [4] - Consumers Energy (Electric+Gas) reported operating revenue of $1.75 billion, exceeding the average estimate of $1.6 billion based on three analysts [4] - The Gas utility segment achieved operating revenue of $387 million, compared to the two-analyst average estimate of $353.4 million, representing a year-over-year increase of 26.1% [4] - The Electric utility segment reported operating revenue of $1.36 billion, exceeding the two-analyst average estimate of $1.23 billion, with a year-over-year change of 10.9% [4] Stock Performance - CMS Energy shares have returned +3.6% over the past month, outperforming the Zacks S&P 500 composite's +2.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Part I—Financial Information [Item 1. Financial Statements](index=17&type=section&id=Item%201.%20Financial%20Statements) This section presents Management's Discussion and Analysis, unaudited consolidated financial statements, and notes for CMS Energy and Consumers Energy for Q2 2025 [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A provides an executive overview, detailing results of operations, cash flow, capital resources, liquidity, and outlook for business segments, emphasizing the 'Triple Bottom Line' - CMS Energy operates electric, gas, and NorthStar Clean Energy segments, influenced by regulation, economy, weather, and commodity prices[41](index=41&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) - The company's strategy aligns with the 'Triple Bottom Line' principle, balancing economic, social, and environmental goals, including commitments to safety, reliability, clean energy, and financial strength[43](index=43&type=chunk)[47](index=47&type=chunk)[52](index=52&type=chunk) CMS Energy Financial Performance Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income Available to Common Stockholders | $500 million | $480 million | | Diluted EPS | $1.67 | $1.61 | - Consumers Energy plans **$20.0 billion** in capital expenditures through 2029, allocating **$14.8 billion** to infrastructure upgrades and **$5.2 billion** to clean generation[73](index=73&type=chunk) [CMS Energy Consolidated Financial Statements (Unaudited)](index=51&type=section&id=CMS%20Energy%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This subsection presents CMS Energy's unaudited consolidated financial statements, including income, comprehensive income, cash flows, balance sheets, and equity changes for periods ended June 30, 2025 CMS Energy Consolidated Income Statement Highlights (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Operating Revenue | $4,285 | $3,783 | | Operating Income | $811 | $695 | | Net Income Available to Common Stockholders | $500 | $480 | CMS Energy Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Assets | $37,699 | $35,920 | | Total Liabilities | $28,728 | $27,172 | | Total Equity | $8,971 | $8,748 | [Consumers Consolidated Financial Statements (Unaudited)](index=58&type=section&id=Consumers%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This subsection presents Consumers Energy's unaudited consolidated financial statements, including income, comprehensive income, cash flows, balance sheets, and equity changes for periods ended June 30, 2025 Consumers Energy Consolidated Income Statement Highlights (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Operating Revenue | $4,094 | $3,630 | | Operating Income | $841 | $698 | | Net Income Available to Common Stockholder | $533 | $452 | Consumers Energy Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Assets | $35,467 | $34,088 | | Total Liabilities | $23,769 | $22,657 | | Total Equity | $11,698 | $11,431 | [Notes to the Unaudited Consolidated Financial Statements](index=64&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and supplementary information for financial statement line items, covering regulatory matters, contingencies, financing, fair value, benefits, taxes, revenue, segment reporting, and VIEs - In March 2025, MPSC authorized a **$176 million** annual electric rate increase for Consumers, effective April 2025, based on a **9.90%** authorized return on equity[209](index=209&type=chunk) - In May 2025, an emergency order required the J.H. Campbell plant to operate 90 days beyond retirement, with Consumers seeking cost recovery at FERC[210](index=210&type=chunk) - Consumers estimates its share of Ludington overhaul contract dispute damages at approximately **$350 million**, which it is seeking to recover through litigation and has deferred as a regulatory asset[221](index=221&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk) - The OBBBA was signed into law in July 2025, with the company evaluating its impact but not anticipating a material effect on financial statements[185](index=185&type=chunk)[263](index=263&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=97&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This item formally incorporates by reference the detailed Management's Discussion and Analysis of Financial Condition and Results of Operations from Part I, Item 1 - The MD&A is incorporated by reference from Part I, Item 1 of this Form 10-Q[315](index=315&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=97&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to market risk have occurred since the 2024 Form 10-K filing[316](index=316&type=chunk) [Item 4. Controls and Procedures](index=97&type=section&id=Item%204.%20Controls%20and%20Procedures) Management of CMS Energy and Consumers concluded their disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Both CMS Energy's and Consumers' management concluded their disclosure controls and procedures were effective as of June 30, 2025[317](index=317&type=chunk)[319](index=319&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter for either entity[318](index=318&type=chunk)[320](index=320&type=chunk) Part II—Other Information [Item 1. Legal Proceedings](index=98&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Notes 1 and 2 of the unaudited consolidated financial statements for information on material legal proceedings - Details on material legal proceedings are provided in Note 1 and Note 2 of the financial statements[321](index=321&type=chunk) [Item 1A. Risk Factors](index=98&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors have occurred since the 2024 Form 10-K filing[322](index=322&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=98&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities, detailing common stock repurchases made to satisfy tax withholding obligations for vested shares - No unregistered sales of equity securities occurred during the period[323](index=323&type=chunk) CMS Energy Common Stock Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 126 | $73.63 | | May 2025 | 882 | $72.29 | | June 2025 | 68 | $69.54 | | **Total** | **1,076** | **$72.27** | [Item 3. Defaults Upon Senior Securities](index=99&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[325](index=325&type=chunk) [Item 4. Mine Safety Disclosures](index=99&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[326](index=326&type=chunk) [Item 5. Other Information](index=99&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[327](index=327&type=chunk) [Item 6. Exhibits](index=101&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including supplemental indentures, employee plans, CEO/CFO certifications, and Inline XBRL documents - Exhibits filed include supplemental indentures, an amended employee incentive plan, and required CEO/CFO certifications under Sarbanes-Oxley Act Sections 302 and 906[331](index=331&type=chunk)

Financial Data and Key Metrics Changes - For the first half of 2025, the company reported adjusted earnings per share of $1.73, exceeding budget expectations and aligning with full-year guidance [25][28] - The full-year guidance remains at $3.54 to $3.6 per share, with confidence towards the high end [26] - Adjusted net income for 2025 was $518 million, benefiting from favorable weather and constructive regulatory outcomes [28][29] Business Line Data and Key Metrics Changes - The company has reached an agreement with a new data center expected to add up to one gigawatt of load, part of a nine gigawatt pipeline [5][6] - The renewables portion of the business is small, typically completing one to two solar projects a year with utility-like returns [16] Market Data and Key Metrics Changes - Michigan has been ranked as one of the best states for business, with strong housing starts and positive growth among residential and commercial customers [7][21] - The company anticipates long-term annual sales growth estimates of 2% to 3% [7] Company Strategy and Development Direction - The company is focused on customer affordability and plans to spread fixed costs over a larger customer base as demand grows [10] - Significant investments are planned in the electric grid and renewable energy to meet Michigan's clean energy law [11][12] - The integrated resource plan (IRP) will be filed in mid-2026, addressing capacity needs and potential additional storage and gas capacity [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the regulatory environment and the company's ability to deliver on financial objectives [25][31] - The company is well-positioned to meet growing energy needs and is prepared for future investments [35][36] Other Important Information - The company has completed the majority of its financing plan for 2025, executing 40 equity contracts totaling approximately $350 million [32][33] - Moody's reaffirmed the company's credit ratings, and the company is working through the review process with S&P [31] Q&A Session Summary Question: Details on the new data center agreement and its ramp-up - Management confirmed the agreement is part of a nine gigawatt pipeline, with early megawatts expected to show up in 2029 or 2030 [41][42] Question: Interaction between the new data center and the $5 billion CapEx upside in the IRP - Management indicated that the $5 billion figure is based on current sales growth and would need to be adjusted if additional capacity is added [54][58] Question: Status of the gas case and potential for settlement - Management reported a positive outlook for the gas case, with 80% of the revised ask and 95% of capital approved, while remaining open to settlement [60][61] Question: Financing plans for 2026 - Management stated that they are considering funding needs for 2026 and may pull ahead some financing if opportunities arise [62][63]

Financial Data and Key Metrics Changes - For the first half of 2025, the company reported adjusted earnings per share of $1.73, exceeding budget expectations and aligning with full-year guidance [23] - The full-year guidance remains at $3.54 to $3.60 per share, with confidence towards the high end [24] - Adjusted net income for 2025 was $518 million, benefiting from favorable weather and constructive regulatory outcomes [25][26] Business Line Data and Key Metrics Changes - The company is experiencing strong performance in its electric service territory, with a projected long-term annual sales growth estimate of 2% to 3% [6][10] - The NorthStar business contributes approximately 5% to the earnings mix, with growth primarily from energy and capacity sales at Dearborn Industrial Generation [14] Market Data and Key Metrics Changes - Michigan has been recognized as a top state for business, with strong housing starts and job growth contributing to positive market conditions [6][19] - The company has agreements with new data centers expected to add up to one gigawatt of load, part of a nine-gigawatt pipeline [4][5] Company Strategy and Development Direction - The company is focused on customer affordability and plans to invest over $25 billion beyond its five-year plan to enhance its electric grid and renewable energy initiatives [9][10] - An integrated resource plan (IRP) is set to be filed in mid-2026, addressing capacity needs and renewable energy requirements [10][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to meet financial objectives and navigate a dynamic regulatory environment [23][32] - The company is well-positioned to capitalize on opportunities arising from the Big Beautiful Bill Act, which supports renewable energy projects [54] Other Important Information - The company has received regulatory approval for a storm deferral, marking a significant development in Michigan's regulatory landscape [19] - Moody's reaffirmed the company's credit ratings, indicating strong credit quality [28] Q&A Session Summary Question: Details on the new one gigawatt data center agreement - Management confirmed that the agreement is part of the nine-gigawatt pipeline and discussions are ongoing regarding the ramp-up of load, expected to begin in 2029 or 2030 [39][40] Question: Interaction between the new data center and the $5 billion CapEx upside - Management indicated that the $5 billion figure is based on current projections and would be adjusted if additional capacity is required due to the new data center [56] Question: Status of the gas case and potential for settlement - Management reported a favorable position in the gas case, with significant support for the revised ask and a willingness to settle if beneficial [59] Question: Financing plans for 2026 - Management stated that they are considering opportunities to derisk equity financing needs for 2026 and will keep options flexible [61]

Financial Performance and Outlook - The company's adjusted EPS for the first half of 2025 is $1.73[33, 36] - The adjusted EPS guidance for the full year 2025 is $3.54 - $3.60[33, 36], toward the high end of the previously stated range of $3.06 - $3.12[33] - The annual dividend per share (DPS) is $2.17[33], up by 11¢[33] - The long-term adjusted EPS growth is projected at +6% to +8%[13, 29, 33], toward the high end[33] - The utility capital plan is $20 billion[33, 48] for 2025-2029, up $3 billion from the prior plan[33, 48] Growth and Investment - The company anticipates 2% to 3% long-term annual sales growth[16, 27] - The company has an approximately 9 GW pipeline opportunity, including data centers[27] - The company plans to invest over $10 billion in electric reliability roadmap[21, 22], including up to 400 miles/year of undergrounding[21] and 20,000 poles replaced per year[23] - The company plans to invest over $5 billion in renewable energy plan[24, 26], including +8 GW solar and +2.8 GW wind[24] Economic Development - Economic development efforts are driving diversified growth, including data centers, across Michigan[17]