First-quarter surprises sent two energy stocks racing in opposite directions Thursday.

CMS ( CMS) -- the company that first made "round-trip" energy trading famous -- bounced on news that it had toppled Wall Street expectations by nearly doubling quarterly profits. But CMS' gain was relatively modest compared with the plunge in Reliant Resources ( RRI), which bloodied the entire sector by widening its quarterly loss and slashing its guidance for the year.

After months of rebuilding following last summer's bombshell about bogus revenue-boosting round-trip trades, CMS showed signs of a rebound in the latest quarter. The Michigan-based utility posted first-quarter profits of $79 million, or 51 cents a share, up from the year-ago 32 cents a share. Profits from ongoing operations, while down a dime from 60 cents a year ago, more than doubled Wall Street expectations of 23 cents a share and triggered a rally in the stock.

News of the upside surprise sent CMS shares surging 10.5% to $6.44. The shares have now almost doubled since bottoming out at $3.41 less than two months ago.

Cold Front

During the latest quarter, CMS benefited from uncontrollable events -- such as favorable foreign currency rates and unusually cold weather -- as well as spending cuts. But the company pointed to its overall success during the quarter as signs of a potential recovery.

"The record shows we're making good progress," CEO Ken Whipple said. "But there are still many challenges ahead."

Even some CMS bears acknowledged that the company delivered a strong first quarter. However, they stopped short of declaring the company mended.

"It certainly seems they've stabilized," one short-seller said. "But it will be several years before Grandma will get her dividends again."

In the meantime, Reliant Resources reminded investors that the sector's woes are far from over. The Houston-based energy company posted a first-quarter loss of $462 million, or $1.59 a share, that was three times bigger than the loss suffered a year earlier. Even excluding special items -- which accounted for most of the net loss -- Reliant still ended the quarter deeper in the red than analysts had expected. The company reported a loss from ongoing operations of 9 cents a share, or 2 cents worse than Wall Street had projected. The latest surprise followed an even bigger miss last quarter.

The company had no sunny guidance to offer, either. Rather, it lowered full-year earnings guidance to between 50 cents and 70 cents a share -- well short of the 81 cents Wall Street was anticipating.

The stock plunged, falling as much as 20% to $4.55, before it clawed its way back above $5 in Wednesday's session.

Marginal

Reliant blamed its dismal performance on thin trading margins, a big $80 million trading hit and poor hedging bets. It also acknowledged that higher interest costs, stemming from a huge $5.9 billion refinancing package this year, ate away at the bottom line.

But like many in the sector, Reliant is convinced that better times lie ahead.

"Our first quarter was one of progress and accomplishment despite the earnings performance," said Reliant CEO Joel Staff. "Our top priorities going forward will be to achieve resolution of outstanding legal and regulatory issues and to accelerate the momentum we have begun to see in regaining our corporate credibility."

Earlier this year, Reliant was singled out for particularly harsh criticism from federal regulators investigating claims that energy traders gamed the power market during the California energy crisis of 2000-01. The company nevertheless went on to ink its big financing package with lenders, fueling a rally that -- until Wednesday's hit -- had lifted Reliant shares to their highest level since last September.

Reliant's plunge dragged the entire sector down on Wednesday. Other big losers were Mirant ( MIR) and Aquila ( ILA). Atlanta-based Mirant tumbled 8.6% to $2.75. And Kansas City-based Aquila slid 4.9% to $2.50.

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