Fortis Inc. Reports Record Q2 Earnings: Is Now the Time to Buy?
Fortis Inc. (TSX:FTS), one of the largest electric and gas utilities companies in North America, announced second-quarter earnings results before the market opened on July 31, and its stock has responded by rising over 1.5%. Let’s take a closer look at the results to determine if we should consider buying in to this rally, or if we should wait for it to subside.
The record-setting results
Here’s a summary of Fortis’s second-quarter earnings results compared with what analysts had expected and its results in the same period a year ago.
|Adjusted Earnings Per Share||$0.44||$0.44||$0.30|
|Revenue||$1.54 billion||$1.27 billion||$1.06 billion|
Source: Financial Times
In the second quarter of fiscal 2015, Fortis’s adjusted net income increased 89.2% to $123 million, its adjusted earnings per share increased 46.7% to $0.44, and its revenue increased 45.6% to $1.54 billion compared with the same quarter a year ago.
The company noted that these very strong results could be primarily attributed to its acquisition of UNS Energy in August 2014, which contributed $494 million in revenue, $52 million in earnings, and had a $0.09 accretive impact on earnings per share in the second quarter.
Here’s a quick breakdown of eight other notable statistics from the report compared with the year-ago period:
- Revenue increased 261.6% to $687 million in its U.S. regulated electric & gas utilities segment (including UNS Energy)
- Revenue decreased 5.3% to $676 million in its Canadian regulated electric & gas utilities segment
- Revenue decreased 5.1% to $74 million in its Caribbean regulated electric utilities segment
- Revenue remained unchanged at $65 million in its non-utility segment
- Revenue increased 272.7% to $41 million in its Fortis Generation segment
- Cash flow from operating activities increased 45.8% to $468 million
- Weighted average number of common shares outstanding increased 29.4% to 277.9 million
- Ended the quarter with $797 million in cash and cash equivalents, an increase of 166.6% from the beginning of the quarter
Should you buy Fortis today?
It was another great quarter for Fortis, so I think its stock responded correctly by moving higher. I also think the stock represents a great long-term investment opportunity today because it trades at attractive forward valuations and because it has a high dividend yield with a very impressive track record of increasing its annual payment.
First, Fortis’s stock still trades at just 17.8 times fiscal 2015’s estimated earnings per share of $2.05 and only 17 times fiscal 2016’s estimated earnings per share of $2.15, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 20.4 and the industry average multiple of 21.4.
Second, Fortis pays a quarterly dividend of $0.34 per share, or $1.36 per share annually, which gives its stock a 3.7% yield at today’s levels. It is also important to note that the company has increased its dividend for 42 consecutive years, the record for a public corporation in Canada, and its increased amount of free cash flow could allow this streak to continue for the foreseeable future.
With all of the information above in mind, I think Fortis is a must-own stock. All Foolish investors should take a closer look and strongly consider making it a core holding today.
Another stock you must consider buying...
Does your portfolio have rock-solid blue chips, like Fortis, at its core? If it does... GREAT! If not, you might want to reconsider your strategy.
Either way, we think you should take a look at what our analysts have identified as one TOP stock for 2015 and beyond--a stock with a tollbooth-like business; a solid management team; and a reliable, consistent, and rising dividend--and you can download the name, ticker symbol, and price guidance absolutely FREE.
NEW! 1 TOP STOCK FOR 2016 AND BEYOND...
Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.
We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.
We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!
Fool contributor Joseph Solitro has no position in any stocks mentioned.
Fortis Inc. (TSX:FTS), one of the largest electric and gas utilities companies in North America, announced second-quarter earnings results before the market opened on July 31, and its stock has responded by rising over 1.5%. Let?s take a closer look at the results to determine if we should consider buying in to this rally, or if we should wait for it to subside.
The record-setting results
Here’s a summary of Fortis?s second-quarter earnings results compared with what analysts had expected and its results in the same period a year ago.
Source: Financial Times
In the second quarter of fiscal 2015, Fortis?s adjusted net…