FORTIS INC. (FTS): what the price assumes

boothcheck covers FORTIS INC. (FTS) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-26.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/FTS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.6%); the inversion above states its own rate.

Per-Model Detail (n=15)

Solvency

Bullet Takeaways

• Fortis is a regulated electric and gas utility that reports in Canadian dollars, and 95% of its revenue comes from rates a regulator approved rather than from anything sold in a competitive market.
• The growth is an approved-spending plan, not a demand story: a 28.8 billion dollar five-year capital program is meant to lift midyear rate base from 42.4 billion in 2025 to 57.9 billion by 2030, supporting dividend growth guided at 4% to 6% a year through 2030.
• The cost of that plan is visible on both sides of the balance sheet: long-term debt of 30,723 million Canadian dollars at the end of 2025 against common equity of 23,810 million, and a share count that keeps rising because part of the dividend is reinvested into new shares.

Bull Case

Mature is the right label, but it is misleading if you read it the way you would read it on an industrial. A regulated utility does not grow by winning customers. It grows by getting permission to spend money, and then earning an approved return on what it spent. So the number that behaves like revenue growth at a normal company is rate base, and at Fortis rate base is scheduled to go from 42.4 billion Canadian dollars at the midpoint of 2025 to 57.9 billion by 2030, a compound rate near 7% a year, funded by a 28.8 billion dollar capital plan. Every other figure in the business follows from that one.

What makes the plan credible is where the demand is coming from. In March 2026 the company's ITC transmission business completed a substation supporting 300 megawatts of load for the first data center at the Big Cedar Industrial Center, with transmission work underway to serve a further 1,600 megawatts expected by 2028. In April 2026 credit support was secured for an energy supply agreement to serve a planned data center in Tucson Electric Power's territory, with initial demand near 300 megawatts. Data centers are the rare load that arrives in blocks large enough to justify transmission investment on its own, and transmission is the part of a utility that regulators historically approve most readily.

The regulatory outcomes have been landing. In February 2026 the Arizona Corporation Commission approved UNS Gas's rate application with a 9.61% return on common equity, a 56% common equity capital structure, and something more useful than either: an annual formulaic rate adjustment mechanism operating within 50 basis points of the allowed return. A formula that adjusts rates annually shortens the gap between spending money and being paid for it, which is the single most persistent drag on a utility in a heavy investment cycle.

Diversification here is jurisdictional rather than commercial. Fortis serves customers in five Canadian provinces, ten U.S. states and the Cayman Islands, so no single regulator or provincial government controls the outcome. Against the domestic cohort the operating economics hold up well: over the last four reported quarters the company converted 12,235 million Canadian dollars of revenue into 3,494 million of operating income. On the same measure EIX runs at 30.8%, DUK at 27.2%, AEP at 24.2%, EXC at 21.0% and PCG at 19.4%. Fortis sits near the top of that group rather than the middle.

The balance sheet is doing what it needs to. In May 2026 Morningstar DBRS confirmed the corporation's A (low) issuer and senior unsecured credit ratings with a stable outlook. For a company that has to raise debt continuously to fund an approved capital plan, the rating is not a decoration. It is the input price on the largest single cost of executing the plan.

The bear will point out that the March quarter's earnings were flat rather than growing, and that is true. The company's own explanation is that rate base growth was offset by wholesale market conditions at UNS Energy, the timing of planned generation maintenance, costs on new rate base that customer rates have not yet caught up to, and a weaker U.S. dollar translation. Three of those four reverse mechanically as rate cases conclude. The fourth is a currency, not a business.

Bear Case

Every large utility in North America is announcing a record capital plan into the same data-center load story at the same time. That is the cycle position worth thinking about. When an entire industry decides simultaneously that it must build, three things follow: the equipment and labour to build with get more expensive, the debt to fund it gets issued into a crowded market, and the customer bills that eventually pay for it all rise together, in front of regulators who answer to the people receiving those bills. Fortis is not making a contrarian bet here. It is making the same bet as everyone else, at the same moment.

The financing arithmetic is where that becomes concrete. Long-term debt stood at 30,723 million Canadian dollars at the end of 2025 against common shareholders' equity of 23,810 million, and total assets reached 76,714 million by March 31, 2026. Finance charges took 372 million out of the March quarter alone, against operating income of 955 million. More than a third of what the utilities earn before financing goes to the people who funded them, and a capital plan of this size means that share does not shrink on its own.

Then there is the quieter dilution. Common shares outstanding went from 507.3 million at December 31, 2025 to 509.1 million at March 31, 2026, largely because shareholders take part of the dividend in stock through the reinvestment plan. That is a real equity raise conducted one quarter at a time without a headline. Rate base compounding near 7% is a company-level number. What reaches a holder is that number minus whatever the share count does, and the share count has been going the wrong way.

The March quarter showed the mechanism that makes this bite. Earnings were essentially flat year over year, and the company named the cause plainly: higher costs associated with rate base growth that customer rates have not yet caught up to. That gap is the standard cost of building fast under rate regulation, and it widens with the size of the program. A 5.6 billion dollar spending year produces the costs immediately and the approved revenue later, and in between the shortfall lands in earnings.

Against that, what does the market value ask for? Not much growth, which is the point: this is not a stretched-expectations name. The demand is instead that the current earning power holds and gets financed on acceptable terms. The static methods still land under the market value. The asset-value approaches, which start from book equity and add the value of earning more than the cost of that equity, sit under by a premium of roughly 102%. The earnings-power approaches sit under by about 118%, and peer multiples by about 32%. Only a cash-flow frame reaches the market value, and it does so by counting operating cash flow while setting capital spending aside. For a company spending 1.4 billion Canadian dollars on plant in a single quarter, and 5.6 billion planned across the year, cash flow before capital spending is not a description of what the owner receives.

The last exposure is the one nobody controls. Fortis reports in Canadian dollars, and a large share of its earning assets sit in the United States. The company listed a weaker U.S. dollar as one of the reasons first-quarter earnings did not grow. A currency move does not change a single kilowatt-hour delivered, and it changes the reported result anyway.

Valuation

A regulated utility's price is a claim on two things a regulator controls: how much capital the company is allowed to have working, and what return it is allowed to earn on it. Fortis has told the market exactly what it expects of the first, a midyear rate base rising from 42.4 billion Canadian dollars in 2025 to 57.9 billion by 2030, and the second is decided one rate case at a time, most recently at UNS Gas where 9.61% on common equity was approved in February 2026. Everything the valuation methods argue about is downstream of those two numbers.

They argue quite a lot. Peer multiples land closest, sitting under the market value by a premium of about 32%. The asset-value approaches, which take book equity and add whatever the business earns above its cost of capital, sit under by roughly 102%. The earnings-power approaches, which capitalize current earning power with no growth credited at all, sit under by roughly 118%. One cash-flow frame reaches the market value and clears it comfortably, and how it gets there matters more than the fact that it does: it counts operating cash flow without subtracting capital spending. Fortis put 1.4 billion Canadian dollars into plant in the March quarter alone and plans 5.6 billion for the year. A frame that ignores that spending is not describing this company.

The cohort comparison is the more useful anchor, and it is favourable on operations. Over the last four reported quarters Fortis turned 12,235 million Canadian dollars of revenue into 3,494 million of operating income. Among the domestic comparables, only EIX at a 30.8% operating margin runs meaningfully ahead of that conversion rate; DUK sits at 27.2%, EVRG at 25.9%, AEP at 24.2%, ES at 22.5%, EXC at 21.0%, PNW at 20.9% and PCG at 19.4%. On growth the picture reverses somewhat: revenue at Fortis rose about 5.8% in 2025 while EIX grew 13.1%, ES 10.1% and AEP 8.5%. A better conversion rate on a slower-growing base is a fair description of the trade being made.

Backing the price out into an implied growth assumption produces an undemanding answer, and for this company that is close to beside the point. A utility carrying 30,723 million Canadian dollars of long-term debt is priced on the cost and availability of that debt at least as much as on the growth of what it earns.

Leverage is therefore where the section has to land. Debt against common equity of 23,810 million at the end of 2025 is a ratio a regulator has effectively blessed, because approved capital structures set it; the UNS Gas order specified 56% common equity for that utility. What the market value is exposed to is not default. It is the price of the next tranche of financing, the pace at which rate cases convert spending into approved revenue, and the share count, which rose from 507.3 million to 509.1 million in a single quarter as dividends were reinvested. Rate base compounding at 7% is the company's number. The holder's number is that, less the cost of the capital raised to produce it.

Catalysts

First-quarter results, released May 6, 2026, were in line with the company's own expectations and unremarkable on the surface, which for a utility is the intended outcome. Revenue was 3,403 million Canadian dollars against 3,338 million a year earlier, operating income 955 million against 953 million, and finance charges 372 million against 370 million. Capital expenditure ran 1.4 billion in the quarter, with the 5.6 billion annual plan described as on track. Management attributed the flat result to rate base growth being offset by wholesale market conditions at UNS Energy, the timing of planned generation maintenance, costs on new rate base not yet reflected in customer rates, a weaker U.S. dollar, and the 2025 sales of the Turks and Caicos and Belize businesses, which are expected to carry a five-cent dilutive effect across the full year.

Regulatory decisions are the events that actually move this business, and two are live. The Arizona Corporation Commission approved the UNS Gas general rate application in February 2026 with a 9.61% allowed return on common equity, a 56% common equity capital structure, and an annual formulaic rate mechanism operating within 50 basis points of that return; new rates took effect March 1, 2026. The larger Tucson Electric Power general rate application is still in progress, with testimony filed during the first quarter and an order anticipated in the fall. That decision is the single most consequential scheduled item on the calendar.

Project milestones have been steady rather than dramatic. ITC completed a substation in March 2026 supporting 300 megawatts of load for the first data center at the Big Cedar Industrial Center, with work underway for a further 1,600 megawatts by 2028. The Arizona Corporation Commission approved the conversion of the Springerville Generating Station from coal to natural gas in March 2026, extending the plant's life. FortisBC Energy filed a revised environmental assessment application for the Tilbury liquefied natural gas storage expansion in the same month. In May 2026, Morningstar DBRS confirmed the A (low) issuer and senior unsecured ratings with a stable outlook. Second-quarter results are scheduled for July 31, 2026.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• EIX (EDISON INTERNATIONAL)
• FY2025 10-K: …electric utility revenue. SCE's Alternative Revenue Programs The CPUC and FERC have authorized additional, alternative revenue programs which adjust billings for the effects of broad external factors or provide for additional billings if the utility achieves certain objectives. These alternative revenue programs…
• FY2025 10-K: …for customers in SCE's service area to choose to purchase power directly from an Electric Service Provider, a limited, phased-in expansion of customer choice ("Direct Access") for nonresidential customers was authorized beginning in 2009, and an additional limited expansion of Direct Access was authorized in 2018.…
• PNW (PINNACLE WEST CAPITAL CORP)
• FY2025 10-K: …between the GAAP financial statement line item Operating revenues less the GAAP financial statement line item Fuel and purchased power as presented on the Consolidated Statements of Income. Operating revenues, less fuel and purchased power is used by Pinnacle West to assess whether customer revenues adequately cover…
• FY2025 10-K: …initiatives and selecting projects to meet business objectives. Our reportable segment's revenue streams are dependent upon regulated rate recovery, which is a primary factor in how we identify operating segments. For information on our reportable business segment's revenues, significant expenses, net income (loss),…
• AEP (AMERICAN ELECTRIC POWER CO INC.)
• FY2025 10-K: …or holding company. In addition, both the FERC and state regulators are permitted to review the books and records of any company within a holding company system. COMPETITION The Vertically Integrated Utilities primarily generate, transmit and distribute electricity to their retail customers in their service…
• FY2025 10-K: …estimates presented. The Vertically Integrated Utilities segment is exposed to certain market risks as a major power producer and through transactions in power, coal, natural gas and marketing contracts. These risks include commodity price risks which may be subject to capacity risk, credit risk as well as interest…
• EVRG (EVERGY, INC.)
• FY2025 10-K: …expenses which are deemed to be directly attributable to revenue-producing activities include plant operating and maintenance expenses at generating units and transmission and distribution operating and maintenance expenses and have been separately presented in order to calculate gross margin as defined under GAAP.…
• FY2025 10-K: …basis for evaluating the Evergy Companies' operations across periods because utility gross margin (non-GAAP) excludes the revenue effect of fluctuations in fuel and purchased power costs and SPP network transmission costs. Utility gross margin (non-GAAP) is used internally to measure performance against budget and in…
• EXC (EXELON CORPORATION)
• FY2025 10-K: …competitive electric generation supplier. PECO, BGE, and DPL also retain significant default service obligations to provide natural gas to certain groups of customers in their respective service areas who do not choose a competitive natural gas supplier. For customers that choose to purchase electric generation or…
• FY2025 10-K: …fluctuations in commodity prices by entering into physical and financial derivative contracts, which are either determined to be non-derivative or classified as economic hedges. The Utility Registrants procure electric and natural gas supply through a competitive procurement process approved by each of the respective…
• DUK (DUKE ENERGY CORPORATION)
• FY2025 10-K: . Competition GU&I's businesses operate as the sole provider of natural gas service within their retail service territories. GU&I owns and operates facilities necessary to transport and distribute natural gas. GU&I earns retail margin on the transmission and distribution of natural gas and not on the cost of the…
• FY2025 10-K: …could reduce recovery of fixed costs in Duke Energy service territories or result in customers leaving the electric distribution system or an increase in customer net energy metering, which allows customers with private solar to receive bill credits for surplus power up to the full retail credit amount. Over time,…
• PCG (PG&E CORP)
• FY2025 10-K: …of such types of retail competition generally is to reduce the number of utility customers, leading to decreased growth or a reduction in the Utility's rate base. 28 The Utility also competes for the opportunity to develop and construct certain types of electric transmission facilities within, or interconnected to,…
• FY2025 10-K: …sustainable, and climate-resilient energy system at an affordable cost for customers. The Utility's capital investment plan, increasing procurement of renewable power and energy storage, increasing environmental regulations, and the cumulative impact of other public policy requirements collectively place continuing…
• ES (EVERSOURCE ENERGY)
• FY2025 10-K: …which breaks the relationship between sales volumes and revenues recognized. Operating Revenues: The variance in Operating Revenues by segment in 2025, as compared to 2024, is as follows: (Millions of Dollars) Increase/(Decrease) Electric Distribution $ 973.1 Natural Gas Distribution 530.9 Electric Transmission 162.3…
• FY2025 10-K: …natural gas utility that serves residential, commercial and industrial customers in parts of Massachusetts; • Yankee Gas Services Company (Yankee Gas), a regulated natural gas utility that serves residential, commercial and industrial customers in parts of Connecticut; and • Aquarion Company (Aquarion), a utility…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.