Earnings call transcript: Fortis tops Q3 2026 estimates as growth plan expands

Fortis reported Q3 2026 EPS of CAD 0.92 versus CAD 0.9019 expected and revenue of CAD 3.23 billion versus CAD 2.9 billion expected; shares were up 0.31% at $83.21. The company raised its five-year capital plan by CAD 3.4 billion to CAD 32.2 billion, supporting 7.5% rate-base CAGR, and increased its quarterly dividend 4% to CAD 0.665 while maintaining 4%-6% annual dividend-growth guidance through 2031. Management cited execution and funding requirements, including expected CAD 250 million of ATM equity over the next 12 months, while noting Arizona regulatory lag and that additional data-center investment is not included in the current plan.

Analysis

The key issue is not whether Fortis can grow rate base, but whether incremental regulated returns will outpace the cost of funding and execution. A larger program can support durable earnings growth, yet debt, hybrids and ATM issuance create a potential per-share growth haircut; regulatory lag makes that mismatch more acute in Arizona before adjustment mechanisms catch up. Revenue upside is not by itself proof of stronger unit economics in a regulated model, so track adjusted EPS, financing costs and allowed returns rather than the top-line beat.

The market may be underpricing the funding/execution burden while giving too much credit to uncontracted load upside. Arizona high-growth scenarios and much of the larger LNG opportunity are not in the base plan; treat them as options, not current earnings. Transmission and distribution investment is comparatively defensible, but labor/material constraints and project slippage could defer rate-base additions. Supplier demand may benefit grid-equipment and engineering firms, but Fortis’s project timing does not establish near-term supplier earnings upside.

Over 1–3 months, the Arizona commission’s final rate-case decision and any EPS-guidance update are the clearest catalysts. Over 6–18 months, watch ATM issuance, credit metrics, construction schedules and whether large-load commitments convert into funded projects. A contrarian risk is duration: a low-beta utility near its high can still de-rate if long-term yields rise, particularly if equity issuance limits per-share growth. The reported estimate beat and platform fair-value label alone do not establish either durable earnings acceleration or overvaluation.

Key Decisions for Investors

• Do not chase FTS on the earnings beat. For new capital, wait for the final Arizona rate order and management’s EPS-guidance decision; the near-term setup has limited demonstrated upside beyond the current plan.
• For existing holders, keep exposure sized as a defensive regulated-growth position, but reassess if ATM issuance expands beyond stated needs, credit metrics lose the company’s targeted cushion, or capital-project delays weaken rate-base growth.
• Treat prospective Arizona data-center demand and Tilbury expansion beyond committed/base-plan work as watch items, not underwriting assumptions. Upgrade the growth thesis only when customer commitments, permits, funding and incremental returns become verifiable.
• Falsifiers: a materially worse Arizona order or prolonged regulatory lag, rising financing costs that pressure per-share growth, or slippage in major projects would weaken the thesis; timely rate relief, stable credit metrics and funded load additions would support it. Monitor long-term yields as a valuation risk.