In a report released yesterday, Ross Fowler from Bank of America Securities reiterated a Sell rating on Fortis (FTS – Research Report), with a price target of C$63.00.
Ross Fowler has given his Sell rating due to a combination of factors affecting Fortis. One of the primary concerns is the recent leadership change at the Federal Energy Regulatory Commission (FERC), with Mark Christie being appointed as Chairman. This change is perceived to elevate the risk profile for Fortis, particularly in terms of transmission ratemaking, as Christie’s past positions suggest a potential reassessment of authorized earnings for transmission owners, which could pressure customer rates and make transmission incentives harder to secure.
Additionally, while Fortis has opportunities for growth, especially in Arizona, its earnings per share (EPS) growth is expected to lag behind its peers. This slower growth, coupled with the current premium valuation of Fortis’s stock, contributes to a less favorable outlook. Although there are some mitigating factors, such as potential increases in base return on equity (ROE) and robust transmission opportunities, the concentrated exposure to transmission ratemaking reform risk at ITC Holdings presents a significant downside that is challenging to offset.
FTS’s price has also changed slightly for the past six months – from $43.870 to $43.920, which is a 0.11% increase.
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