CMS Energy Q3 2026: $456M NorthStar write-down cut EPS to $0.39; adjusted EPS rose 55% to $1.44

CMS Energy, the parent of Michigan utility Consumers Energy, reported third-quarter 2026 diluted earnings per share (EPS — profit divided by the share count, including shares that could be issued) of $0.39, down from $0.92 a year earlier. Net income available to common shareholders fell 56% to $121 million. The drop is almost entirely one decision: CMS is selling its non-utility renewable projects, and marking them down to what buyers are expected to pay cost $456 million before tax (net of the share borne by outside partners). Strip that out and the company's own adjusted EPS rose 55% to $1.44 from $0.93 — but that number has its own boost, from tax-driven gains at the same renewables business.

Key metrics

Operating margin is the share of revenue left after running the business (fuel, purchased power, maintenance, depreciation, property taxes), before interest and income tax. This quarter it includes a $525 million NorthStar impairment, disposal and exit charge; without that charge operating income would have been $572 million, a 26.2% margin. Adjusted figures are from CMS's October 27, 2026 earnings release (8-K Exhibit 99.1); everything else is from the 10-Q.

Nine months: revenue rose 6.9% to $6,742M; net income available to common fell to $576M from $775M; GAAP EPS was $1.86 vs $2.59, and adjusted EPS $2.95 vs $2.66 (+10.9%).

Where the earnings came from

Electric utility (+$73M). The 10-Q's bridge: the electric rate increase in effect since May (including a return on renewable spending) added $41 million; higher volume and sales mix added $18 million (deliveries rose to 10.7 billion kWh from 10.4 billion); lower storm-restoration costs added $36 million; and $16 million more AFUDC (allowance for funds used during construction — an accounting credit that lets a utility record a return on projects still being built, which the MPSC allowed on renewable-plan construction from 2026) plus $7 million of AFUDC on interest. Against that: $12 million more depreciation and $4 million more property tax from a bigger asset base, $16 million of other operating costs, $9 million more debt expense, and $19 million more income tax on higher pre-tax profit. Energy-waste-reduction program revenue and cost both fell $11 million, a wash.

Gas utility (+$13M). A $22 million rate increase, offset by $8 million more interest, $3 million from the end of a credit tied to the 2024 sale of an unregulated business, and higher depreciation. The third quarter is the gas business's smallest; it earns most of its money in winter.

NorthStar Clean Energy (-$204M). The $456 million impairment, disposal and exit cost (net of the $102 million share of the impairment borne by outside investors in the projects) explains all of it and more. The rest of NorthStar moved the other way: "higher earnings from Michigan renewable projects, reflecting projects achieving commercial operation" added $116 million, and lower tax expense $124 million (mostly the tax benefit of the write-down).

Corporate (-$36M). $21 million higher tax expense, $11 million lower interest earnings and $4 million more interest.

What the headline numbers hide

The write-down is real money, just not recurring. The $525 million operating charge breaks down as $454 million of impairments on projects now held for sale, a $15 million loss on selling a 24 MW solar farm in Delta Township, Michigan, $33 million of contract-termination (breakage) fees, $7 million of retention and severance and $16 million of other exit costs. A separate $33 million wrote down equity stakes in projects CMS doesn't control. These are one-time in the sense that the business is being exited, but they are a permanent loss of shareholder value: CMS invested more in these projects than buyers will now pay. The assets held for sale were written down to $789 million.

Adjusted EPS is lifted by tax-equity accounting at NorthStar. Excluding the write-down and its tax effect ($456M less $117M), NorthStar earned roughly $135 million more than a year ago, which is most of the adjusted $172 million gain. Its source is the Michigan solar projects financed with tax-equity investors (outside investors who fund a project in exchange for most of its tax credits). The income statement shows $214 million of losses attributed to those noncontrolling investors this quarter; $102 million of that is their share of the impairment, leaving $112 million vs $5 million a year ago. Under these partnership agreements, earnings and tax attributes are split by ratios that change over a project's life, so placing projects in service for tax purposes shifts losses to the investor and gains to CMS. Our Q2 report flagged that NorthStar's first-half jump came from "timing of tax benefits." It is largely an accounting allocation tied to projects entering service, not cash from selling more power, and it should not be assumed to repeat at this size every quarter.

Lower storm costs partly reflect a deferral. The $36 million storm-cost improvement is footnoted to the "Service Restoration Cost Deferral": in August 2026 the MPSC let Consumers record $57 million of March 2026 storm repair costs as a regulatory asset (a cost to be recovered from customers later, so it comes off the income statement now). Year to date, storm costs are still $34 million higher than in 2025.

Dilution, not buybacks. Diluted shares rose 4.3% to 313.2 million after CMS issued about 6.5 million shares for $495 million net this year under its 2023 equity program. A new $3 billion equity program opened in May has had no sales yet. CMS bought back no stock in the quarter beyond shares withheld for employee taxes.

Cash. Nine-month operating cash flow was $1,798 million, up 2% (net income of $282M is depressed by the non-cash write-down, so it is not a useful comparison). Capital spending was $2,945 million, up 7.1%, so operating cash covered about 61% of it before $539 million of dividends ($181 million of it in Q3, derived from the $358 million paid in the first half per the Q2 10-Q); CMS raised $2,173 million of new debt and $530 million of stock to fill the gap. Debt and finance leases (excluding securitization debt) rose to $19,728 million from $18,313 million at year-end. For a utility building rate base, that funding gap is normal; it is also why the share count keeps rising.

On balance the quarter is understated: the $1.08-a-share NorthStar write-down makes GAAP EPS look far worse than the business. The adjusted $1.44 overshoots in the other direction, though: roughly $135 million of it is NorthStar improvement, most of it from Michigan projects entering service under tax-equity deals.

Takeaway: The utility itself had a good quarter (earnings up $86 million on rate increases, more electricity sold and lower storm costs), but the 55% jump in adjusted EPS is mostly NorthStar tax-equity accounting, not the utility. With NorthStar being sold, future earnings rest on Consumers' rate cases, and the October gas order granted only $139 million of the $232 million requested.

Did last time's read hold up?

Our Q2 report said the second half had to deliver roughly $2.33–$2.40 of adjusted EPS, and listed the gas rate order, storm costs and a possible NorthStar write-down as the things to watch.

• Gas rate order: arrived on schedule in October, but at $139 million and a 9.80% ROE versus $232 million and 10.25% requested. This is the second order in a row below the 10.25% Consumers asks for (the 2025 electric order was 9.90%).
• NorthStar write-down: happened, at $456 million net of partners' share, and was excluded from adjusted EPS as the Q2 report expected.
• Storm costs: reversed in Q3 ($36 million lower), helped by the $57 million deferral.
• Guidance math: Q3 adjusted EPS of $1.44 brings the nine months to $2.95, so the reaffirmed $3.83–$3.90 range now needs roughly $0.88–$0.95 in Q4. The ask is smaller than it looked in July, largely because of NorthStar's tax-equity gains.

Rate cases, the supply plan and Campbell

ROE is the profit rate on shareholders' invested capital that the regulator lets the utility build into customer prices.

• Integrated resource plan filed (September 2026): a 20-year supply plan adding more than 19 GW of renewable and clean resources through 2040 and two natural-gas plants of about 1,375 MW, both proposed for service in 2031 on existing industrial sites. It needs MPSC approval.
• J.H. Campbell coal plant: Department of Energy emergency orders now keep it running through November 14, 2026. Consumers expects to seek $303 million of net compliance costs from FERC (after $344 million of market revenue); none of the recovery filings is approved yet. In September 2026 the D.C. Circuit vacated the first (May 2025) order as unlawful; CMS expects DOE to appeal, and later orders are unaffected for now.
• Hydro dam sale: still awaiting MPSC and FERC approval; Consumers filed exceptions in July proposing that about $270 million of payments under the power-purchase agreement go to a state-controlled dam-safety fund.
• State tax dispute: CMS has asked the Michigan Supreme Court to hear its appeal over how sales to MISO are apportioned for state tax; $19 million was added to 2026 tax expense, and a loss could have a material impact.

Outlook

In its October 27 release CMS reaffirmed 2026 adjusted EPS of $3.83–$3.90, 2027 adjusted EPS of $4.08–$4.17, and long-term adjusted EPS growth of 6–8% "with continued confidence toward the high end." Consumers expects weather-normalized electric deliveries (sales adjusted to strip out unusually hot or mild weather) to grow over the next five years and gas deliveries to stay stable. The five-year utility capital plan is $24.1 billion ($8.8B generation, $8.6B electric distribution and other, $6.7B gas), which management expects to grow rate base (the asset value the regulator lets it earn a return on) by more than 10% a year.

Our read: 2026 looks within reach. Q4 needs $0.88–$0.95, and the new gas rates start in November. 2027 is the harder year. The $4.08–$4.17 target has to grow from a 2026 base that carried NorthStar tax-equity gains that won't recur at that size, and NorthStar's out-of-state projects will be gone. Meanwhile the two latest rate orders landed below the 10.25% ROE Consumers asks for, and continuing share sales under the $3 billion program will dilute EPS. Watch the April 2027 electric order (the $468 million request), whether FERC approves Campbell cost recovery, and the NorthStar sale prices against the $789 million carrying value.