Investing.com -- Jefferies has downgraded utility company CMS Energy from Buy to Hold and cut its price target to $74 from $88, citing growing uncertainty surrounding the company's leadership transition, data center growth prospects, and the future of its NorthStar business segment.

The downgrade follows the unexpected retirement of Chief Financial Officer Rejji Hayes, a widely respected executive who had served as CFO for approximately nine years. Hayes' immediate departure surprised investors and raised concerns about potential strategic changes at the company, particularly regarding NorthStar, CMS Energy's unregulated business unit.

Jefferies emphasized that CMS Energy's underlying business fundamentals remain intact. The company continues to project annual earnings growth of 6% to 8% and maintains a $24 billion capital investment plan through 2030, supported by an expected 10.5% annual growth rate in regulated utility assets.

However, analysts argued that the company's premium valuation is becoming harder to justify. CMS has lagged peers in securing large-scale data center contracts, a key growth opportunity for utilities. In contrast, rival DTE Energy has already landed several major hyperscale data center projects in Michigan, strengthening its growth outlook.

Another major concern is the future of NorthStar. Investors worry that a potential sale of the renewable energy assets within the division could lead to an earnings reset if proceeds are not redeployed efficiently. Jefferies described NorthStar as the primary overhang on the stock, noting that management has provided little clarity on its long-term plans.

The brokerage lowered its valuation multiple for CMS Energy and reduced its target price, though it stopped short of issuing a bearish recommendation. Analysts said the stock could regain favor if the company secures a major data center contract or provides a clear, earnings-neutral path for NorthStar.

Despite the downgrade, Jefferies reiterated that CMS Energy's regulated utility operations remain healthy, with visible rate-base growth, stable earnings expectations, and ongoing infrastructure investments. The firm views the current rating as a reflection of unresolved catalysts rather than deteriorating fundamentals.