BofA Downgrades Fortis On Premium Valuation, Near-Term Pressures

Fortis Inc’s FTS stock is relatively more expensive than its peers and there seems to be limited upside ahead, “even if additional capex were to materialize within the current plan,” according to BofA Securities.

The Fortis Analyst: Dariusz Lozny downgraded the rating for Fortis from Neutral to Underperform, while reducing the price target from $56 to $51.

The Fortis Thesis: The Federal Energy Regulatory Commission’s (FERC) regional transmission organization (RTO) incentive adder and currency pressures are near-term risks for the company’s earnings, Lozny said in the downgrade note.

Despite these risks, MISO (Midcontinent Independent System Operator) transmission is likely to be “one of the key sources of long-term upside for companies in the broad Midwest footprint,” the analyst noted.

“Offsetting the transmission exuberance is a cautious outlook on FTS’s Arizona and New York utilities where the regulatory environments remain below-average,” he added.

FTS Price Action: Shares of Fortis had slipped by 0.38% to $44.27 at the time of publication Wednesday.