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CMS Energy (CMS) Arm Divests Appliance Service Plan Business

CMS Energy Corp.’s CMS subsidiary, Consumers Energy, recently completed the divestment of its Appliance Service Plan (“ASP”) business to American Water Resources LLC. American Water Resources is an Oncourse Home Solutions company.

ASP, a leading provider of appliance protection and related services to homeowners in Michigan, will continue to serve its current customers.

Rationale Behind the Sale

The latest sale agreement reflects CMS Energy’s efforts to streamline its business and increase focus on its core business of electricity and natural gas. The sale proceeds from the ASP divestment will most likely be used in the company’s electric and natural gas grid strengthening, as well as enhancement of its renewable energy portfolio.   

The latest transaction is in line with the company’s earlier announced plan to divest its immaterial business activities.

Peer Moves

As demand for electricity usage continues to rise across the United States, along with increasing adoption of clean energy, utility companies have been lately engaged in selling their non-core assets to spend more on strengthening their energy infrastructure, enhancing their clean energy portfolio as well as reducing debt.  Apart from CMS, other utilities that have been following this strategy are:

FirstEnergy FE: On Mar 25, 2024, FirstEnergy completed the sale of an additional 30% ownership interest in its FirstEnergy Transmission, LLC subsidiary, to Brookfield Super-Core Infrastructure Partners for $3.5 billion. The deal will enable the company to strengthen its balance sheet and support its five-year grid investment program.

The Zacks Consensus Estimate for FE’s 2024 sales implies a rise of 6.9% from 2023. The consensus estimate for 2024 earnings per share implies an improvement of 4.7%.

Dominion Energy D: On Mar 7, 2024, Dominion Energy successfully divested its Ohio natural gas utility, The East Ohio Gas Company, to Enbridge Inc. for approximately $6.6 billion. The sale proceeds from this transaction will enable D to make significant regulated capital investments to ensure the supply of reliable energy to its customers.

D boasts a long-term (three-to five-years) earnings growth rate of 8.5%. The Zacks Consensus Estimate for 2024 sales implies a rise of 2.2% from 2023.

Duke Energy DUK: In October 2023, the company completed the sale of its unregulated utility-scale Commercial Renewables business to Brookfield, operator of one of the world’s largest publicly traded, pure-play renewable power platforms. The company plans to use the proceeds from this transaction to strengthen its balance sheet and avoid additional holding company debt issuances.

DUK boasts a long-term earnings growth rate of 6.3%. The Zacks Consensus Estimate for 2024 sales implies a rise of 4.5% from 2023.

Price Performance

Over the past six months, shares of CMS have gained 6.2% compared with the industry’s 2.9% growth.

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Zacks Investment Research

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Zacks Rank

CMS Energy currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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