Fortis Inc. Earnings Call Highlights Growth and Challenges

Fortis ((TSE:FTS)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Fortis Inc. painted a generally positive picture, emphasizing strong earnings per share (EPS) growth, significant capital investments, and a steadfast commitment to dividend growth. Despite some challenges, such as a decline in EPS for UNS Energy, potential tariff impacts, and a lower return on equity (ROE) in Alberta, the overall sentiment suggests a promising trajectory for growth and regulatory achievements.

Earnings Per Share Growth

Fortis reported an EPS of $1, marking a $0.07 increase over the same quarter last year. This growth underscores the company’s ability to enhance shareholder value and reflects its operational efficiency and strategic investments.

Strong Capital Investment

The company invested $1.4 billion in utility systems as part of its 2025 capital plan. With 27% of the five-year $26 billion plan already invested, Fortis is on track to meet its long-term infrastructure goals, which are pivotal for sustaining growth and improving service delivery.

Rate Base Growth

Fortis projects a rate base increase by approximately $14 billion, reaching $53 billion by 2029. This expansion supports an average annual rate-based growth of 6.5%, indicating robust future earnings potential and a strong foundation for continued financial performance.

Dividend Growth Commitment

The company remains committed to an annual dividend growth guidance of 4% to 6% through 2029. This marks 51 consecutive years of increasing dividends, highlighting Fortis’s dedication to returning value to its shareholders.

Regulatory Success

Fortis achieved a constructive outcome for FortisBC’s multi-year rate framework and made continued progress on regulatory fronts in Arizona and New York. These successes are crucial for ensuring stable operations and favorable conditions for future growth.

UNS Energy EPS Decline

UNS Energy experienced a $0.03 decrease in EPS due to lower margins on wholesale sales and higher costs associated with rate-based growth not yet reflected in customer rates. This highlights the challenges in balancing growth investments with immediate financial returns.

Potential Tariff Impact

The company is monitoring changes in government policies, including tariffs, which may affect inflation, supply chain availability, and customer affordability. This vigilance is essential for mitigating potential risks to the business environment.

Lower Allowed ROE in Alberta

Western Canadian Utilities faced a lower allowed ROE of 8.97%, effective January 1st, 2025. This adjustment poses a challenge to profitability but also reflects the regulatory landscape’s evolving nature.

Forward-Looking Guidance

Fortis provided detailed guidance for the fiscal year, with plans to continue its five-year capital plan worth $26 billion, having already invested 27% in Q1. The long-term strategy includes significant transmission investments and a focus on maintaining a stable financial outlook, supported by recent affirmations of credit ratings by Moody’s and DBRS. The company is also attentive to potential impacts from government policies on tariffs, inflation, and supply chain availability.

In summary, Fortis Inc.’s earnings call conveyed a positive sentiment, driven by strong EPS growth, substantial capital investments, and a commitment to dividend increases. While challenges like the UNS Energy EPS decline and lower ROE in Alberta were acknowledged, the overall outlook remains optimistic, with strategic plans in place to support sustained growth and regulatory success.