Fortis Down Nearly 1% as Credit Suisse Analyzes its Q1
Credit Suisse has kept a Neutral rating and $34 target price, but raised its 2011 estimates for Fortis Inc. (FTS.TO).
Earnings review: "Fortis reported Q1 2011 headline EPS (FD) of C$0.65 beating our C$0.64 estimate, the Street's C$0.624 view and exceeding the C$0.59-C$0.64 range. In general, we believe Fortis continues to make steady progress in delivering relatively consistent financial results from a largely regulated asset base. We do not place undue emphasis on quarterly results in much of our universe as a result of the inherently long-cycle nature of many assets. For Fortis, we continue to focus on the ongoing significant regulated capital plan along with the potentially positive upward bias to regulated returns."
Significant organic growth continues: "As expected, Fortis continued to provide a robust outlook for its utility capital program. The company expects consolidated gross capital expenditures to be roughly C$1.2bn for 2011 and about C$5.5bn over the next five years with 83% of that total amount going to utility activity."
Improving capital market conditions: "Historically, Fortis has been very adept at acquisitions. Corporate growth has benefited from the company's ability to successfully acquire and integrate selected assets. In our view, the company is well positioned in the current market for acquisition opportunities."
Valuation: "We are raising our 2011 EPs estimate to C$1.77 from C$1.76. Our C$34.target price and Neutral rating are obtained utilizing multiple valuation approaches, including: an 18.5x P/E multiple of 2012 earnings; a 1.8x book value multiple; and, a DCF based valuation. We reiterate our Neutral rating."
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