On Tuesday, BofA Securities updated its outlook on CMS Energy (NYSE:CMS), increasing the stock's price target from $63.00 to $65.00, while reiterating a Buy rating. The firm's analyst cited the utility company's potential for industry-leading earnings per share (EPS) growth and favorable regulatory environment as the basis for the positive stance.
The revised price target reflects an updated earnings forecast for the years 2024 to 2026. The new EPS estimates stand at $2.69, $2.80, and $3.01 for the respective years, which are slightly adjusted from the previous predictions of $2.62, $2.72, and $3.04. These figures compare to a consensus of $2.68, $2.81, and $3.02 among other analysts.
For the first quarter of 2024, the analyst anticipates CMS Energy to report an EPS of 96 cents, which falls short of the consensus estimate of $1.03. Despite this, the overall long-term outlook remains positive due to the utility's robust growth prospects.
The new $65 price objective is grounded in a price-to-earnings (P/E) based sum of the parts methodology. This approach values the utility at a three times premium relative to its peer group. The premium is justified by the company's clear visibility on EPS growth and the constructive regulatory backdrop it operates in, as per the analyst's comments.
CMS Energy, headquartered in Michigan, is expected to benefit from these factors, which play a crucial role in the firm's favorable assessment and the subsequent price target raise.
InvestingPro Insights
In light of BofA Securities' updated outlook on CMS Energy, it's worth noting some key financial metrics and analyst insights from InvestingPro. With a market capitalization of $17.2 billion and a P/E ratio of 19.09, CMS Energy is a significant player in the utility sector. The adjusted P/E ratio for the last twelve months as of Q4 2023 stands at 22.82, reflecting a premium valuation relative to near-term earnings growth, as the PEG ratio for the same period is 3.55.
InvestingPro Tips highlight CMS Energy's substantial dividend track record, having raised its dividend for 17 consecutive years, and maintaining dividend payments for 18 consecutive years. The dividend yield as of early 2024 is 3.49%, with a notable dividend growth of 11.96% in the last twelve months as of Q4 2023. These aspects underscore the company's commitment to shareholder returns, even as it operates with a significant debt burden.
For investors seeking additional insights, InvestingPro offers more tips on CMS Energy, including predictions on profitability and stock price volatility. To explore these further, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/CMS. Currently, there are six additional InvestingPro Tips available for CMS Energy, which could provide a deeper understanding of the company's financial health and market position.
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