FTS: Shares Will Balance Dividend Reliability With Evolving Regulated Demand Opportunities

We are lifting our Fortis price target to C$73.10 from C$71.41, reflecting analysts' broadly higher targets across the Street as they factor in stronger rate base growth, resilient regulated earnings and slightly richer forward valuation multiples.

Analyst Commentary

Recent Street research reflects a generally constructive stance on Fortis, with multiple upward revisions to price targets clustered in the high C$60s to high C$70s range. Analysts cite improving visibility on the companys multi year capital program and a more supportive regulatory backdrop as key drivers behind these adjustments.

While the overall tone is positive, the range of ratings from Buy to Underweight suggests differing views on valuation, execution risk and relative upside versus other North American utilities.

Bullish Takeaways

• Bullish analysts highlight Fortis improved five year rate base growth profile, now tracking around the mid single digit to high single digit CAGR, as a key underpinning for sustained earnings and dividend growth.
• Several target hikes into the mid to high C$70s indicate confidence that the company can execute on its capital program and realize returns that justify slightly richer valuation multiples versus historical averages.
• Positive commentary points to resilient regulated earnings and diversified utility exposure, including opportunities in faster growing jurisdictions such as Arizona, as supporting a premium to slower growth peers.
• Ongoing refinement of models by bullish analysts incorporates stronger load growth assumptions, including potential data center related demand, which could provide upside to the current base case outlook.

Bearish Takeaways

• Bearish analysts, including JPMorgan, continue to see limited relative upside even after raising price targets, maintaining more cautious ratings as they view the shares as fully valued versus the utilities sector.
• Cautious views emphasize execution risk around the expanded capital plan, where delays, cost inflation or regulatory pushback could pressure the rate base growth trajectory and weaken the investment case.
• More conservative models assume that potential incremental demand from data centers and other growth drivers may take longer to materialize, limiting near term earnings acceleration and capping multiple expansion.
• Some remain wary that higher interest rate volatility or changes in regulatory frameworks could compress valuation multiples, particularly for utilities perceived to be trading near the upper end of their historical ranges.

What's in the News

• The board declared a fourth quarter 2025 common share dividend of $0.64 per share, payable on December 1, 2025, to shareholders of record as of November 17, 2025 (company announcement).

Valuation Changes

• The fair value estimate has risen modestly to CA$73.10 from CA$71.41, reflecting slightly stronger expected returns.
• The discount rate has increased slightly to 6.43 percent from 6.37 percent, indicating a marginally higher required return in the valuation model.
• Revenue growth assumptions are effectively unchanged at approximately 4.83 percent, suggesting stable expectations for top line expansion.
• Net profit margin assumptions remain essentially flat at about 15.61 percent, implying no material change in the long term profitability outlook.
• The future P/E multiple has risen slightly to 21.3x from 20.8x, pointing to a modestly richer forward valuation embedded in the model.