Fortis Looks Cheap on Earnings-But the Mixed Valuation Says Don't Trust the First Glance

Fortis screens mixed, not obviously cheap

Fortis is not a clean discount. At about 23.7x P/E, it trades below the modelled fair P/E of 31.6x, but that single gap obscures a broader point: the stock passes only 3 of 6 valuation checks. That is a mixed read, not a clear bargain. With next earnings on Nov. 3, 2026 still ahead, the setup is less "buy because it is cheap" than "assess whether fair value could become attractive again."

Why the same numbers feel different

New buyers are likely reacting to a strong operating report: $3.53 adjusted EPS, 7% annual rate base growth, another dividend increase, and $5.6 billion of capex. In the moment, that can make a reasonable price look like a discount.

For existing holders, the reflex is different. After years of compounding, even a valuation pause can feel like a mistake. The cleaner way to frame it is this: Fortis may not be cheap, but it also may not deserve to be punished if execution holds.

The bullish case rests on rate-base conversion

The bull case is not that Fortis is cheap today on current earnings alone. It is that today's multiple may understate earnings that could build over time if investment converts to rate base on schedule.

How capex can become earnings

Fortis is asking investors to price a regulated model in which spending can become an earning base over time. Management has laid out a $28.8 billion 2026-2030 capital plan and is targeting a 7.0% five-year rate-base CAGR. In a mostly regulated framework, more qualifying infrastructure can support higher revenue bases and, in time, higher earnings. That is where predictable rate structures matter.

The execution already looks tangible, not theoretical. Fortis spent $2.9 billion in the first half of 2025, and management said the $5.2 billion annual capital plan on track. The company also pointed to progress in Arizona and New York. If those proceedings advance and new load growth gets incorporated, investors have a stronger case for paying up on future earnings.

The main execution risk

The risk is treating Fortis's plan as if it were already realized income. It is not. A regulated utility's growth still depends on regulatory timing, financing needs, and execution. Rate cases do not arrive on schedule by default, and capital raised before earnings hit can pressure returns on equity in the short run.

So the cheap case has substance, but only if the conversion process holds.

Why the market still defends the premium

The mixed valuation already does some of that work. At a recent C$79.80 price, the stock passes only 3 of 6 valuation checks. Bears do not need to argue that operations have weakened. They only need to argue that the premium is being paid for growth that is still in the ground.

What the bear case is really saying

The bear case is not panic. It is restraint. Fortis still deserves respect for its 52 Years of Consecutive Dividend Increases and its steady $0.64 quarterly dividend. But respect is not the same as an unlimited premium. A premium multiple only works if future growth is still outside the price, not already financed by it.

That is the real split in the debate. Bulls see highly executable growth and a market that may be slow to reward regulated investment conversion. Bears see the same execution and argue that a reliable growth story can still be fairly valued when investors are already paying for visibility, dividend durability, and low-risk execution.

What could move Fortis in either direction

With valuation already mixed rather than obviously cheap, Fortis needs fresh proof to stretch the multiple from here.

Proof points to watch

The clearest near-term proof points are the TEP general rate application and the Central Hudson general rate application. If those filings move toward approval, investors can start treating more of the capex program as earned rate base rather than future hope.

A second trigger is demand visibility. Fortis also has an agreement to provide ~300 MW to a data center through TEP, showing that local load growth is not purely theoretical.

A practical way to approach the stock

For new money, the disciplined stance is not to pay full premium on promise alone. The mixed screen still says Fortis passes only 3 of 6 valuation checks, so the cleaner setup is to watch for confirmation around regulatory progress and earnings conversion.

For current holders, the more useful expectation is not that quality alone is enough, but that quality plus realized recovery can support the multiple.

What would weaken the setup

If rate applications stall, or if capex keeps rising without matching regulatory recovery, the stock could remain a good utility without becoming a cheap one. In that scenario, investors would be holding solid operations at a fair price, not a clear discount.