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Wolfe Research cuts Fortis shares to $38 on valuation concerns

Published 02/12/2024, 04:52 AM
Updated 02/12/2024, 05:06 AM
© Reuters.

On Monday, Wolfe Research adjusted its outlook on Fortis Inc. (NYSE: NYSE:FTS), reducing the stock's price target to $38 from the previous $39, while retaining an Underperform rating. The firm highlighted that Fortis achieved an 11% growth in its 2023 earnings per share (EPS), aligning with the consensus and Wolfe Research's own projections. The past year was marked by significant achievements in regulatory matters for the company.

The focus for Fortis is now shifting towards its subsidiary ITC Holdings Corp., particularly concerning the right of first refusal (ROFR) decisions in Iowa and the Tranche 2 awards at the Midcontinent Independent System Operator (MISO). These developments are pivotal as they could influence the company's future performance and market position.

Wolfe Research pointed out that despite the successful year in terms of regulatory advancements, the current valuation of Fortis's stock is considered full. This assessment implies that the stock price may already reflect the company's recent achievements and projected earnings, leaving limited room for upside potential.

Fortis, a leader in the regulated gas and electric utility industry, is closely watched by investors for its stable earnings and potential growth opportunities. The company's performance in regulatory aspects and its operations at ITC are critical factors that could impact its stock valuation and investor sentiment.

The revised price target of $38 reflects Wolfe Research's view that while Fortis has had a strong operational performance, the current stock price may not offer significant growth prospects for investors. This adjustment serves as a signal to the market regarding Wolfe Research's expectations for the stock's future movement.

InvestingPro Insights

Fortis Inc. (NYSE: FTS) is navigating through a period of significant financial and operational developments. As Wolfe Research adjusts its outlook on the company, investors may benefit from additional insights provided by InvestingPro. According to real-time metrics, Fortis has a market capitalization of $19.16 billion and is trading at a P/E ratio of 16.97, which is slightly adjusted from the last twelve months as of Q4 2023 to 17.18. This aligns closely with the InvestingPro fair value estimation of $31.08, suggesting that the stock may be overvalued at its current price of $38.94.

InvestingPro Tips reveal that Fortis carries a significant debt burden, which could be a point of concern for investors looking at the company's financial resilience. On the brighter side, the company has demonstrated a strong commitment to returning value to shareholders, having raised its dividend for 37 consecutive years. This could be an attractive feature for income-focused investors, especially considering the current dividend yield of 4.49%.

With the next earnings date on May 1, 2024, two analysts have revised their earnings upwards for the upcoming period, reflecting potential optimism in Fortis's financial prospects. Investors considering this utility leader may want to explore further insights and additional InvestingPro Tips available at https://www.investing.com/pro/FTS. To enhance your investing strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 9 more InvestingPro Tips listed on the platform, investors can deepen their analysis and make more informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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