On Thursday, BMO Capital Markets adjusted its outlook on Fortis Inc. (NYSE::CN) (NYSE: FTS), a utility company, by raising the share price target to C$58.50, up from the previous C$58.00, while keeping a Market Perform rating on the stock.
The adjustment follows the company’s first-quarter results for 2024, which indicated that earnings per share (EPS) growth is expected to continue as the company overcomes regulatory delays and progresses on its C$25 billion growth project backlog.
The analyst from BMO Capital Markets noted that despite ongoing uncertainties regarding interest rates and regulatory proceedings, such as the Iowa Right of First Refusal (ROFR), the currency exchange trends between the U.S. dollar and Canadian dollar, along with capital expenditure trends, appear to be favorable for Fortis. The firm highlighted the utility company’s asset base, which is 99% regulated, as a key factor in limiting the potential downside for EPS.
Fortis’ performance in the first quarter of 2024 was underscored by the company’s ability to successfully navigate through regulatory challenges and continue with effective project execution.
The BMO analyst expressed confidence in holding the shares, supported by the company’s solid growth backlog and the limited risk to earnings thanks to the regulated nature of its assets.
The updated price target of C$58.50 reflects a modest increase from the previous target but maintains the same Market Perform rating, indicating that BMO Capital Markets views the stock as fairly valued given the current market conditions and company fundamentals.
The analyst’s comments suggest that while there are external factors that could impact Fortis, the company’s strong project execution and favorable capital expenditure trends are likely to support ongoing EPS growth.
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InvestingPro Insights
As Fortis Inc. (NYSE: FTS) continues to navigate the complexities of the utility sector, it’s important for investors to consider the company’s financial health and market performance. With a market capitalization of 19.53 billion USD and a P/E ratio of 17.27, Fortis is positioned as a significant player in its industry. The company’s commitment to shareholder returns is evident through its impressive track record of raising its dividend for 37 consecutive years, a testament to its stability and reliability as an investment. Despite a slight decline in revenue growth over the last twelve months as of Q1 2024, by -1.83%, the company’s gross profit margin remains robust at 43.6%, highlighting efficient operations.
Investors should note that Fortis operates with a significant debt burden and its short-term obligations exceed liquid assets. However, the company’s low price volatility and a dividend yield of 3.22% may appeal to those seeking steady income. It’s worth mentioning that two analysts have revised their earnings downwards for the upcoming period, which could signal caution. For those considering a deeper dive into Fortis’ financials and future prospects, InvestingPro offers additional insights and tips. With a total of 9 InvestingPro Tips available, investors can gain a more comprehensive understanding of Fortis’ potential and risks. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/FTS.
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