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1. Company Snapshot

1.a. Company Description

Fortis Inc.operates as an electric and gas utility company in Canada, the United States, and the Caribbean countries.It generates, transmits, and distributes electricity to approximately 438,000 retail customers in southeastern Arizona; and 100,000 retail customers in Arizona's Mohave and Santa Cruz counties with an aggregate capacity of 3,485 megawatts (MW), including 53 MW of solar capacity and 252 MV of wind capacity.


The company also sells wholesale electricity to other entities in the western United States; owns gas-fired and hydroelectric generating capacity totaling 65 MW; and distributes natural gas to approximately 1,065,000 residential, commercial, and industrial customers in British Columbia, Canada.In addition, it owns and operates the electricity distribution system that serves approximately 577,000 customers in southern and central Alberta; owns 4 hydroelectric generating facilities with a combined capacity of 225 MW; and provides operation, maintenance, and management services to five hydroelectric generating facilities.Further, the company distributes electricity in the island portion of Newfoundland and Labrador with an installed generating capacity of 143 MW; and on Prince Edward Island with a generating capacity of 130 MW.


Additionally, it provides integrated electric utility service to approximately 68,000 customers in Ontario; approximately 272,000 customers in Newfoundland and Labrador; approximately 32,000 customers on Grand Cayman, Cayman Islands; and approximately 16,000 customers on certain islands in Turks and Caicos.The company also holds long-term contracted generation assets in Belize consisting of 3 hydroelectric generating facilities with a combined capacity of 51 MW; and the Aitken Creek natural gas storage facility.It also owns and operates approximately 90,200 circuit Kilometers (km) of distribution lines; and approximately 50,500 km of natural gas pipelines.


Fortis Inc.was founded in 1885 and is headquartered in St. John's, Canada.

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1.b. Last Insights on FTS

Fortis Inc.'s recent performance was driven by strong Q2 2025 earnings, beating expectations with a 7.84% earnings surprise and 0.99% revenue surprise. The company's robust increase in earnings per share and outlined growth and sustainability initiatives boosted investor confidence. A $2.82 billion revenue, up 5.4% from Q2 2024, also contributed to the positive momentum. Wolfe Research increased its price target, citing the energy company's impressive year-to-date performance. Fortis' upcoming teleconference on November 4 to discuss Q3 2025 results and new five-year capital outlook may provide further insights.

1.c. Company Highlights

2. Fortis Inc. Delivers Strong Q3 2025 Earnings with 4% to 6% Annual Dividend Growth Guidance

Fortis Inc. reported adjusted earnings per share (EPS) of $0.87 for the third quarter of 2025, beating analyst estimates of $0.858. The company's reported earnings were $409 million or $0.81 per common share. The strong EPS performance was driven by the company's regulated growth strategy, with a new $28.8 billion 5-year capital plan unveiled during the earnings call, supporting rate base growth of 7%.

Publication Date: Nov -05

📋 Highlights
  • Adjusted EPS Growth: Q3 2025 adjusted EPS reached $0.87, up $0.02 from the same period in 2024.
  • Capital Plan Expansion: New 5-year capital plan of $28.8 billion (up $2.8B from prior) targets 7% rate base growth, reaching $58B by 2030.
  • Transmission Investment Focus: 77% of capital allocation directed toward transmission/distribution infrastructure, supporting grid reliability and regulated growth.
  • Dividend Guidance: Maintained 4-6% annual dividend growth through 2030, reflecting confidence in sustained cash flow from regulated assets.
  • Cash Flow to Debt Cushion: 5-year average cash flow to debt ratio of 12.4%, with 100 bps above S&P’s threshold by 2030, ensuring financial flexibility.

Financial Performance

The company's financial performance was solid, with adjusted EPS up $0.02 compared to the third quarter of last year. The EPS growth is expected to continue, with analysts estimating next year's revenue growth at 4.3%. The company's funding plan remains largely consistent with the previous plan, with average cash flow to debt metrics up over 12% through the period. As stated by Jocelyn Perry, "the average for the S&P metric over the 5 years is 12.4%, but as you get to the latter part of the plan, we're pushing more like 100 basis points."

Valuation Metrics

To understand what's priced in, we can look at Fortis Inc.'s valuation metrics. The company's P/E Ratio is 20.14, P/B Ratio is 1.52, and Dividend Yield is 3.45%. The EV/EBITDA ratio is 12.6, indicating a reasonable valuation. The ROE is 7.56%, and the Net Debt / EBITDA ratio is 6.09, indicating a relatively high debt burden.

Capital Plan and Growth

The growth in the new capital plan is largely driven by higher transmission investments, with approximately 77% directed towards transmission and distribution investments and critical infrastructure. Consolidated rate base is expected to increase by $16 billion from approximately $42 billion in 2025 to $58 billion in 2030. The company's focus on prioritizing safety, reliability, affordability, and the delivery of cleaner energy for its customers is expected to drive long-term growth.

Dividend Growth and Funding Plan

The company has a 4% to 6% annual dividend growth guidance through 2030. The funding plan is expected to be largely funded from cash from operations, utility debt, and the dividend reinvestment plan. The company has a $500 million ATM program available for funding flexibility as required. As Jocelyn Perry stated, the company is targeting a cushion of 75 to 100 bps above the S&P threshold, giving it dry powder for flexibility to finance projects not in its capital plan.

3. NewsRoom

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3 Stocks I think Should Be Included In Every Million Dollar Portfolio

Nov -29

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POR or FTS: Which Is the Better Value Stock Right Now?

Nov -24

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CIBC Reaffirms Outperform Rating While Raising Fortis (FTS) Price Target

Nov -21

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These 3 Dividend Stocks Are Perfect for Any Portfolio

Nov -18

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Fortis (TSX:FTS) Margin Gains Reinforce Steady-Growth Narrative Against Softer Canadian Market Outlook

Nov -05

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Fortis Inc (FTS) Q3 2025 Earnings Call Highlights: Strong Performance and Strategic Growth Plans

Nov -04

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Fortis (FTS) Misses Q3 Earnings Estimates

Nov -04

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Fortis Q3 Adjusted Net Earnings per Share Rise YoY, Beat Estimates; Increases 5-Year Capital Plan by $2.8 Billion

Nov -04

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.75%)

6. Segments

UNS Energy

Expected Growth: 2.5%

UNS Energy's 2.5% growth is driven by increasing customer base, rate base growth, and investments in grid modernization. Additionally, the integration with Fortis Inc. provides access to capital and expertise, enabling the company to pursue strategic initiatives and improve operational efficiency.

ITC

Expected Growth: 2.8%

ITC's 2.8% growth is driven by increasing demand for transmission infrastructure, favorable regulatory environment, and strategic investments in grid modernization. Additionally, growing renewable energy integration and electrification of transportation are expected to boost demand for ITC's services, supporting long-term growth.

FortisBC Energy

Expected Growth: 3.2%

FortisBC Energy's 3.2% growth is driven by increasing demand for natural gas and electricity in British Columbia, fueled by population growth, industrial expansion, and infrastructure development. Additionally, investments in grid modernization and renewable energy sources contribute to the segment's growth, while regulated rate base growth and cost recovery mechanisms provide a stable foundation.

Other Electric

Expected Growth: 2.2%

Fortis Inc.'s Other Electric segment growth of 2.2% is driven by increasing demand for electricity in the Caribbean and Central American markets, coupled with investments in grid modernization and renewable energy sources. Additionally, strategic acquisitions and partnerships have expanded the company's customer base, contributing to the segment's growth.

Central Hudson

Expected Growth: 2.9%

Central Hudson's 2.9% growth is driven by increasing electricity and gas distribution rates, infrastructure investments, and customer additions. Additionally, Fortis Inc.'s strategic acquisitions and cost savings initiatives contribute to the growth. The utility's focus on grid modernization, renewable energy integration, and energy efficiency programs also support its growth momentum.

Fortis Alberta

Expected Growth: 3.1%

Fortis Alberta's 3.1% growth is driven by increasing electricity demand from industrial and commercial customers, investments in grid modernization, and rate base growth from infrastructure upgrades. Additionally, the segment benefits from a stable regulatory environment and a growing economy in Alberta, supporting long-term growth prospects.

FortisBC Electric

Expected Growth: 3.4%

FortisBC Electric's 3.4% growth is driven by increasing demand for electricity in British Columbia, fueled by population growth, industrial development, and electrification of transportation. Additionally, investments in grid modernization and renewable energy sources, such as wind and hydroelectric power, contribute to the segment's growth.

Corporate and Other

Expected Growth: 2.6%

The 2.6% growth in Corporate and Other segment of Fortis Inc. is driven by increased transmission revenue, higher earnings from equity investments, and a rise in other income. Additionally, the company's focus on cost savings initiatives and operational efficiencies have contributed to the growth. Furthermore, the segment has benefited from a favorable regulatory environment and a strong capital structure.

7. Detailed Products

Electricity Distribution

Fortis Inc. provides electricity distribution services to residential, commercial, and industrial customers through its subsidiaries, including FortisAlberta and Newfoundland Power.

Electricity Generation

Fortis Inc. generates electricity through its subsidiaries, including Fortis Generation and Newfoundland and Labrador Hydro, using a mix of hydroelectric, thermal, and wind power sources.

Natural Gas Distribution

Fortis Inc. provides natural gas distribution services to residential, commercial, and industrial customers through its subsidiaries, including FortisBC Energy and Newfoundland and Labrador Hydro.

Electricity Transmission

Fortis Inc. owns and operates high-voltage transmission lines and substations, connecting generating stations to the grid and enabling the reliable transmission of electricity.

Renewable Energy

Fortis Inc. invests in renewable energy projects, including wind, hydro, and solar power, to reduce its carbon footprint and provide clean energy solutions.

8. Fortis Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Fortis Inc. is medium due to the presence of alternative energy sources and energy storage solutions.

Bargaining Power Of Customers

The bargaining power of customers for Fortis Inc. is low due to the regulated nature of the utility industry and the lack of alternatives for customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Fortis Inc. is medium due to the presence of multiple suppliers and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants for Fortis Inc. is low due to the high barriers to entry in the utility industry, including regulatory hurdles and significant capital requirements.

Intensity Of Rivalry

The intensity of rivalry for Fortis Inc. is high due to the presence of multiple competitors in the utility industry and the ongoing competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 58.27%
Debt Cost 4.83%
Equity Weight 41.73%
Equity Cost 4.83%
WACC 4.83%
Leverage 139.63%

11. Quality Control: Fortis Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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OGE Energy

A-Score: 6.8/10

Value: 5.5

Growth: 4.1

Quality: 5.6

Yield: 8.0

Momentum: 7.5

Volatility: 10.0

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Evergy

A-Score: 6.7/10

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Growth: 4.7

Quality: 4.7

Yield: 7.0

Momentum: 8.5

Volatility: 10.0

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Fortis

A-Score: 6.6/10

Value: 5.5

Growth: 4.4

Quality: 4.5

Yield: 7.0

Momentum: 8.0

Volatility: 10.0

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FirstEnergy

A-Score: 6.4/10

Value: 5.7

Growth: 3.6

Quality: 4.6

Yield: 8.0

Momentum: 6.5

Volatility: 10.0

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Hydro One

A-Score: 6.1/10

Value: 4.5

Growth: 4.7

Quality: 4.1

Yield: 5.0

Momentum: 8.0

Volatility: 10.0

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Avangrid

A-Score: 5.2/10

Value: 6.2

Growth: 4.3

Quality: 3.8

Yield: 5.0

Momentum: 5.0

Volatility: 6.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

70.68$

Current Price

70.68$

Potential

-0.00%

Expected Cash-Flows