FORTIS INC. $32 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 248.9 million; Market cap: $8.0 billion; Price-to-sales ratio: 1.7; Dividend yield 3.9%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands. In addition, wholly owned FortisBC Energy distributes natural gas in B.C.
Fortis recently completed its takeover of CH Energy Group, which supplies gas and power in New York State. Fortis paid $1.5 billion U.S., including the assumption of $500 million U.S. of CH’s debt.
The company made several concessions to win regulatory approval, including freezing electricity rates until June 2015. It also extended the contract of CH’s main union by one year, to April 30, 2017. These moves will hurt CH’s contribution to Fortis’s earnings, at least in the short term.
Meanwhile, Fortis earned $129 million, or $0.67 a share, in the three months ended March 31, 2013. That’s up 6.6% from $121 million, or $0.64 a share, a year earlier. Higher power rates and more customers at Fortis’s Western Canadian utilities pushed up its earnings.
However, revenue fell 3.1%, to $1.11 billion from $1.15 billion. That’s mainly because warmer winter weather in B.C. cut natural gas demand. Lower gas prices also hurt Fortis’s revenue.
The stock trades at a somewhat high 17.9 times the $1.73 a share that Fortis should earn in 2013. The $1.24 dividend yields 3.9%.
Fortis is a hold.
