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01/11 03:08
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings report shows a mix of positive and negative factors. Positive elements include consistent dividend growth, strong credit ratings, and capital investments. However, concerns arise from regulatory uncertainties, potential impacts of tariffs, and lack of clear guidance on some issues. The Q&A session did not reveal significant new information to alter the sentiment. While EPS and net earnings increased, the absence of a share repurchase program and regulatory risks balance the outlook, resulting in a neutral sentiment.
Earnings Per Share (EPS) $1, representing a $0.07 increase year-over-year. The increase was driven by contributions from Central Hudson ($0.05 increase due to rate-based growth and conclusion of the 2024 general rate application), ITC ($0.01 increase from rate-based growth), and Western Canadian Utilities ($0.01 increase from rate-based growth). However, UNS Energy saw a $0.03 decrease due to lower margins on wholesale sales and higher costs.
Net Earnings $499 million, which is $0.07 higher than Q1 2024. This increase is attributed to the same factors affecting EPS, including contributions from Central Hudson and ITC, as well as the impact of foreign exchange rates.
Capital Investment $1.4 billion invested in utility systems during the quarter. This is part of a $26 billion five-year capital plan focused on transmission investments and infrastructure improvements.
Debt Issuance Over $1 billion of debt issued in Q1 to repay borrowings and fund the capital program.
Credit Ratings Moody's confirmed Baa3 credit rating and stable outlook; DBRS confirmed A (low) credit rating and stable outlook. S&P reaffirmed Fortis Alberta's A- credit rating and revised its outlook from negative to stable.
Foreign Exchange Impact A higher average U.S. to Canadian dollar exchange rate of 1.43 compared to 1.35 in Q1 2024 contributed a $0.03 EPS increase.
Weighted Average Shares Higher-weighted average shares lowered EPS by $0.01 due to shares issued under the dividend reinvestment plan.
New Retail Load Growth in Arizona: TEP is negotiating for new retail load growth, including a customer with a 300 megawatt initial phase expected to ramp up in 2027.
Incremental Investment Opportunities: Fortis is pursuing incremental investment opportunities at ITC and Tucson Electric Power, with a potential $2.5 billion to $5 billion associated with UNS Energy's Integrated Resource Plans.
Capital Investment: Fortis invested $1.4 billion in utility systems during Q1 2025, with a five-year capital plan of $26 billion focused on transmission investments and infrastructure support.
Earnings Per Share: Fortis reported earnings per share of $1, a $0.07 increase from Q1 2024.
Credit Ratings: Moody's confirmed Fortis' Baa3 credit rating and stable outlook, while DBRS confirmed an A (low) credit rating.
Regulatory Developments: FortisBC received a constructive decision on its multi-year rate framework for 2025-2027, and TEP plans to file a rate case this summer for a formulaic rate adjustment mechanism.
Regulatory Issues: Fortis is closely monitoring changes in government policies, including tariffs, which could impact inflation, supply chain availability, and general economic conditions. While no significant near-term impacts are expected on the 2025 capital plan, potential tariff-induced cost increases may affect customer affordability in the long term.
Supply Chain Challenges: The company is aware of potential supply chain challenges that could arise from changes in government policies and tariffs, which may affect the availability of materials and costs.
Economic Factors: General economic conditions are being monitored as they could influence the company's capital plan and operational costs.
Credit Ratings and Financial Stability: Fortis has received stable credit ratings from Moody's and DBRS, but ongoing dialogue with S&P regarding physical and climate risk indicates potential vulnerabilities in credit stability.
Wildfire Risk: The introduction of Public Safety Power Shutoff (PSPS) plans in Arizona and Fortis Alberta highlights the company's proactive approach to managing wildfire risks, which could impact operational reliability and costs.
Regulatory Lag: The upcoming rate case in Arizona aims to implement a formulaic rate adjustment mechanism to reduce regulatory lag, which could stabilize rates but also presents risks if not approved.
Capital Investment: Invested $1.4 billion in utility systems during Q1 2025 as part of a $26 billion five-year capital plan focused on transmission investments and infrastructure improvements.
Rate Base Growth: Expect rate base to increase by approximately $14 billion to $53 billion by 2029, supporting an average annual rate-based growth of 6.5%.
Dividend Growth Guidance: Committed to annual dividend growth guidance of 4% to 6% through 2029.
Incremental Investment Opportunities: Actively pursuing opportunities at ITC and Tucson Electric Power, including $3.7 billion to $4.2 billion in capital expenditures for MISO LRTP Tranche 2.1 projects.
Wildfire Mitigation Strategies: Implemented Public Safety Power Shutoff (PSPS) plans in Arizona and FortisBC to enhance safety and reliability.
2025 Capital Plan: Expect no significant near-term impacts to the 2025 capital plan despite potential tariff-related cost increases.
EPS Expectations: Reported earnings per share of $1 for Q1 2025, a $0.07 increase from Q1 2024.
Regulatory Developments: TEP plans to file a rate case this summer to propose an annual formulaic rate adjustment mechanism.
Annual Dividend Growth Guidance: Fortis is committed to an annual dividend growth guidance of 4% to 6% through 2029, continuing a track record of increasing dividends for the past 51 consecutive years.
Share Repurchase Program: None
The earnings call presents a mixed outlook. Positive aspects include the capital plan execution and potential growth in Arizona and BC. However, concerns arise from decreased EPS, higher finance costs, and vague management responses regarding project timelines and growth opportunities. The Q&A section reveals uncertainties about key projects and funding, tempering overall sentiment. Without a market cap, a neutral prediction accounts for both growth potential and current financial challenges.
The earnings call summary and Q&A indicate strong financial performance with EPS growth driven by rate base investments and subsidiary performance. The company's capital expenditures align with growth strategies, and there are promising opportunities in Arizona and BC. The Q&A section revealed management's positive outlook on energy infrastructure, despite some vague responses. The announcement of a dividend growth plan and EPS increase suggests investor confidence. Overall, the company's strategic investments and optimistic guidance contribute to a positive sentiment, likely leading to a stock price increase of 2% to 8% over the next two weeks.
The earnings report shows a mix of positive and negative factors. Positive elements include consistent dividend growth, strong credit ratings, and capital investments. However, concerns arise from regulatory uncertainties, potential impacts of tariffs, and lack of clear guidance on some issues. The Q&A session did not reveal significant new information to alter the sentiment. While EPS and net earnings increased, the absence of a share repurchase program and regulatory risks balance the outlook, resulting in a neutral sentiment.
The earnings call summary and Q&A indicate strong financial performance, with record capital investment and adjusted EPS growth. Shareholder returns are robust, with consistent dividend increases. Despite some regulatory and operational risks, the strategic focus on infrastructure and rate base growth, along with a solid dividend policy, suggests a positive sentiment. The Q&A revealed some uncertainties, but overall, the company's proactive strategies and financial health are likely to lead to a positive stock price movement.
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