Key Morningstar Metrics for Fortis
- Fair Value Estimate: C$61.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Low
What We Thought of Fortis' Earnings
Fortis reported 2024 operating earnings per share of $3.28, up from $3.09 in 2023 and in line with our full-year expectations. During the year, Fortis increased the dividend by 6.1%, in line with earnings growth.
Why it matters: Fortis' regulated operations supported a 6% increase in earnings. Partially offsetting these benefits were higher costs and more shares outstanding.
- Management reaffirmed its 2025-29 dividend growth target of 4%-6%. Fortis does not provide earnings guidance.
- Continued good execution at the company’s regulatory operations drove strong earnings. Earnings from ITC, the company’s most important and fastest-growing subsidiary, grew 7% from capital investments.
The bottom line: We are maintaining our fair value estimate of C$61 per share and narrow moat rating.
- Fortis has a 3-star rating as of Feb. 13. We think the market appreciates the firm’s growth opportunities.
- We still expect an average 6.5% earnings growth during the next five years, with earnings accelerating in the back half of our forecast.
The long view: The company’s C$26 billion five-year capital investment plan supports our earnings outlook. We think there is a potential for sizable transmission opportunities after our initial five-year forecast. Additional opportunities are materializing in MISO, the Midwest transmission zone.
- ITC expects USD 3.7 billion-USD 4.2 billion of capital investments in Michigan and Minnesota, where the company has the right of first refusal on projects. We also think ITC will be awarded competitively bid transmission projects in Iowa. Most of this investment will occur after 2029.
- In Arizona, UNS is currently moving forward on 300 megawatts of additional load beginning in 2027, which would increase retail sales by 20%.
Coming up: Arizona regulation continues to improve. A recent plan approved by commissioners allows utilities to propose formula rates. We expect Fortis to request formula rates to reduce regulatory lag in the state.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.