Fortis (TSE:FTS) Stock is Soaring – Is It Worth a Buy ?

Fortis: Strong Q2 Earnings But Is the Stock Overvalued? 

Fortis Inc. (NYSE: FTS) is an electric and gas utility company, operating across Canada, the United States, and the Caribbean, and is a prominent player in North America’s regulated utility sector. Since its founding in 1987 with assets of just $390 million, Fortis has expanded its asset base to $69 billion, driven by strategic growth and diversification. 

In this analysis, we review Fortis’ recent Q2 earnings results, explore Wall Street’s views, conduct a fair value assessment, and analyze options market sentiment to assess whether Fortis presents a compelling investment opportunity.

Earnings Recap

On July 31, Fortis announced its Q2 2024 earnings, reporting an EPS of $0.67, which surpassed Street expectations of $0.47. This strong performance reflects the stability of its regulated utility businesses, which continue to deliver solid results despite broader industry challenges. 

According to CEO David Hutchens, Fortis is making steady progress on its $4.8 billion capital plan for 2024 and remains committed to its five-year, $25 billion investment strategy. 

These investments aim to enhance infrastructure, improve grid resilience, and support the transition to cleaner energy sources. Additionally, Fortis released its 2024 Sustainability Report, highlighting key achievements in reducing emissions and promoting sustainability. 

With a projected annual rate base growth of 6.3% through 2028, Fortis expects to maintain its 4%–6% annual dividend growth target, reinforcing its long-term value proposition for shareholders.

Analysts’ Views

Wall Street analysts are generally neutral on Fortis, with an average “Hold” rating. Price targets range from $29 to $46, with an average target of $41.23, indicating a potential downside of about 7% from the current stock price. 

Source: Seeking Alpha

What Bulls Are Saying about Fortis

Fortis is expected to see positive EPS growth, with forecasts reaching $3.32 in 2024 and $3.46 in 2025. This is largely driven by favorable foreign exchange impacts and improvements in the allowed return on equity at its Central Hudson subsidiary.

The company’s ambitious $25 billion capital investment plan is projected to boost rate base growth and future cash flows. These factors suggest a stable outlook for long-term investors looking for steady returns.