Fortis Inc. (FTS) Q3 2026 earnings review
Fortis raises its five-year spending plan, but sells new shares
Fortis, a North American electric and gas utility group, expanded its five-year investment plan while selling new shares to help pay for it. Revenue rose 6% from a year ago and profit per share excluding one-offs climbed 8% by our math from businesses owned a year ago, helped by power grid investments and summer electricity demand in Arizona. Chief executive David Hutchens unveiled a $32.2 billion five-year capital plan and extended the 4-6% annual dividend growth plan through 2031.
| Profit per share, excluding one-offs | $0.92 +8.2% from businesses owned a year ago (+5.7% headline) |
|---|---|
| Revenue | $3,115M +6.0% from a year ago |
| 2027–2031 capital plan | $32.2B Up $3.4B (+11.8%); 7.5% annual rate base growth |
| 2026 capital spending outlook | Raised $400M Now $6.0B (+6.9% from 2025) |
⚖️ Verdict: 🟢 Bullish
The story got better because Fortis lifted its five-year asset growth rate to 7.5% a year and received a favourable recommended rate order in Arizona that includes an annual formula to reduce regulatory lag. One caution: the utility group tapped its at-the-market equity programme for $260 million after leaving it unused for a year, confirming that the larger building plan requires open-market share sales that dilute per-share profit.
The question now is how much of the 7.5% annual asset growth will reach shareholders as per-share profit. Either the new Arizona rate formula closes the earnings gap in 2027, or ongoing share issuances and higher interest costs keep per-share growth closer to the 4% dividend increase. The final Arizona commission vote in November and the renewed share-sale programme in early 2027 will decide.
🐂 Bull Case
Five-Year Capital Plan Rises To $32.2 Billion
"Today, we are introducing our new $32.2 billion five-year capital plan, the largest in Fortis history, which reflects the critical investments required to deliver safe, reliable and resilient energy service to our customers," chief executive David Hutchens said. Fortis is a North American electric and gas utility group that earns regulated returns on its rate base, the value of the grid and pipeline assets on which regulators allow it to earn a profit.
The utility group lifted its 2027-2031 spending plan by $3.4 billion, or 11.8% by our math, above the prior five-year plan. Management said the increase is "primarily driven by FERC-regulated transmission investments at ITC related to the MISO LRTP tranche 2.1 portfolio of projects", alongside Liquefied Natural Gas (LNG) expansion at the Tilbury site in British Columbia. ITC is Fortis's US high-voltage power grid subsidiary, and MISO is the regional grid operator in the US Midwest.
- Five-year capital plan (2027-2031): $32.2 billion, up $3.4 billion from the 2026-2030 plan
- Three-year rate base growth rate (to 2029): 7.7% a year, reaching $55.8 billion
- Five-year rate base growth rate (to 2031): 7.5% a year, up from 7.0% previously, reaching $63.9 billion
- New Iowa power line project won by ITC in October 2026: US$1.0 billion total, with US$0.5 billion inside this five-year plan
This matters because faster asset growth directly raises the ceiling on future utility earnings and supports extending the 4-6% annual dividend growth target through 2031. What to watch: the full breakdown of project spending in the 2026 annual report early next year. That disclosure will show how much of the $3.4 billion increase comes from Tilbury Phase 1B versus US power lines.
Arizona Judge Backs Formula Rates For Tucson
Fortis has faced a persistent earnings drag at UNS Energy, its Arizona utility business that includes Tucson Electric Power (TEP), because of "costs associated with rate base growth not yet reflected in customer rates". When a utility builds power plants and lines before regulators approve higher customer bills, depreciation and interest costs reduce profit in the meantime.
In October 2026, an administrative law judge at the Arizona Corporation Commission (ACC), the state utility regulator, issued a recommended order on TEP's rate application. The judge recommended a 9.65% allowed return on common equity, a 55.5% equity share in the capital structure, and an annual formulaic rate adjustment mechanism within 50 basis points of the allowed return, with new customer rates starting December 1, 2026.
The recommended order argues against the concern that Arizona regulatory lag will permanently depress earnings, because an annual formula adjusts bills each year without waiting for a lengthy rate case. However, the concern only fades until the full commission votes in November 2026. What to watch: the final ACC vote in November 2026. Approval of the annual formula would allow UNS Energy earnings to rebound in 2027.
Power Demand And Liquefied Gas Add Upside
Beyond the $32.2 billion capital plan, Fortis is lining up multi-billion-dollar grid, power generation, and gas projects for the late 2020s and 2030s. In September 2026, FortisBC Energy, its British Columbia gas utility, received federal and provincial environmental approval for the Tilbury Phase 2 LNG Expansion, which can produce up to 2.5 million tonnes of liquefied gas a year for marine bunkering and export.
In October 2026, TEP and UNS Electric filed 15-year resource plans in Arizona showing up to US$1.6 billion of base investment above the five-year plan through 2031, plus a high-demand scenario requiring 800 megawatts of extra power generation and up to US$1.5 billion of additional spending. Meanwhile, ITC estimates US$2.9 billion to US$3.4 billion of extra Midwest transmission work beyond 2031.
None of the $2 billion to $4 billion Tilbury Phase 2 spending or the extra Arizona resource plan spending sits inside the $32.2 billion budget, so any customer contracts signed over the next year will lift the budget further. What to watch: final investment decisions on Tilbury Phase 2 and Arizona request-for-proposal results in 2027. Signed commercial agreements would convert these estimates into funded rate base.
🐻 Bear Case
Share Sales Start As Capital Spending Rises
Fortis states in its outlook that common equity for the new five-year capital plan is expected to be "predominantly supported by the Corporation's dividend reinvestment plan", under which shareholders take new shares instead of cash dividends. For the past year, the utility group kept its $500 million at-the-market (ATM) share issuance programme untouched.
In the third quarter, Fortis tapped that programme and sold 3.4 million common shares at an average price of $77.17 for $260 million in net proceeds, while also issuing US$1.0 billion of junior subordinated notes at 6.63% to 6.88% interest rates that rating agencies treat as half equity. The company also said it will "re-establish the ATM equity program in early 2027 to provide funding flexibility".
Selling shares on the open market contradicts the earlier framing that dividend reinvestment alone would cover equity needs, because the enlarged $32.2 billion capital plan requires extra capital to protect credit ratings. By our math, diluted shares rose 1.7% from a year ago to 513.3 million, which trimmed per-share profit growth by $0.01 in the quarter and $0.04 over nine months.
What to watch: the size of the new ATM programme in early 2027 and quarterly share issuance in the fourth quarter. Continued open-market share sales of $200 million or more a quarter would keep per-share profit growing much slower than rate base.
Rate Lag And Interest Costs Hold Back Profit
While Fortis grows its midyear rate base by 6.8% in 2026 to $45.3 billion, profit per share is not keeping pace. Over the first nine months of 2026, profit per share excluding one-offs rose 2.3% by our math, to $2.69 from $2.63 a year ago. In the third quarter, profit per share excluding one-offs rose 5.7% to $0.92, or 8.2% by our math after stripping out $0.02 of profit from Caribbean and Central American utilities sold in 2025.
In the third quarter, operating margin rose 0.4 percentage points from a year ago to 30.1% as operating expenses — day-to-day utility maintenance and administration — fell 1.1 percentage points of revenue to 25.8%, offsetting energy supply costs rising 0.5 percentage points to 26.4%. However, third-quarter finance charges rose 6.8% to $395 million, and the Court of Appeal of Alberta dismissed FortisAlberta's appeal seeking higher capital funding under its 2024-2028 rate rules.
What to watch: Corporate and Other segment finance charges and UNS Energy earnings in the first quarter of 2027. If interest costs on the new US$1.0 billion notes offset the December TEP rate reset, per-share profit growth will remain stuck in the low-to-mid single digits.
Risks this quarter didn't answer
Three standing concerns from prior quarters received no final resolution in the third-quarter report.
- Arizona data center agreements and politics: Negotiations for second-phase data center power in Tucson remain unannounced after five quarters, and state political opposition to data center power rates continues ahead of the November ACC vote.
- Legal challenge to Arizona formula rates: The Arizona Court of Appeals allowed the Residential Utility Consumer Office to challenge the regulator's authority to use formula rates; the timing and outcome remain unknown.
- Credit rating cash flow metrics: Fortis did not publish updated five-year average funds-from-operations-to-debt ratios for S&P or Fitch under the enlarged $32.2 billion capital plan; the annual report will update those figures.
👓 Other Themes
Central Hudson Settles 2023 Gas Explosion Claims
During the third quarter, Central Hudson, Fortis's New York electric and gas utility, settled substantially all plaintiff lawsuits stemming from a November 2023 residential gas explosion and fire in Wappingers Falls, New York. Fortis recorded a US$214 million liability accrual on its balance sheet, up from US$105 million in the second quarter, alongside an identical US$214 million insurance receivable because insurance is expected to cover the full cost with no earnings impact.
Stronger US Dollar Lifts Reported Figures
Because Fortis reports in Canadian dollars while earning most of its profit in the United States, currency swings shift its reported numbers. The average US-to-Canadian dollar exchange rate rose to 1.40 in the third quarter from 1.38 a year ago, adding $5 million, or $0.01 per share, to quarterly profit. Management also raised its 2026 currency assumption to 1.38 from 1.35, while keeping 1.35 for the 2027-2031 capital plan.
💲 Other KPIs
Cash generated from utility operations rose 26.7% from a year ago, accelerating from 10.7% growth in the first half. Higher cash earnings from rate base growth, $64 million from selling clean-energy tax credits at UNS Energy, and construction deposits for the Eagle Mountain pipeline drove the increase, though cash flow remained $191 million below capital spending.
Total debt — combining short-term borrowings, current debt installments, long-term debt, and finance leases — rose 9.5% by our math over the first nine months of 2026, from $34.63 billion at year-end 2025. The utility group issued $4.62 billion of long-term debt through September, including US$1.0 billion of junior subordinated notes, to fund grid construction and build a $1.88 billion cash balance.
Profit attributable to common shareholders at ITC, the US Midwest electric transmission unit, rose 12.1% from a year ago, accelerating from 6.3% growth in the second quarter and 2.0% in the first quarter. Ongoing power grid investments and lower stock-based compensation costs outweighed higher holding company interest expenses.
🔮 Guidance
Raised. Fortis lifted its 2026 capital spending plan by $400 million, pointing to 6.9% growth over 2025 by our math. With $4.22 billion spent through September, the full-year plan leaves $1.78 billion for the fourth quarter by our math, up 23.5% from a year ago. Management cited faster construction on Midwest transmission lines and British Columbia gas projects, plus a stronger US dollar.
Raised. The new five-year plan increases capital spending by $3.4 billion and lifts the five-year compound annual rate base growth rate to 7.5% from 7.0%, with three-year growth through 2029 running at 7.7% to $55.8 billion. By our math, the plan adds $18.6 billion to rate base between 2026 ($45.3 billion) and 2031 ($63.9 billion), assuming a constant 1.35 US-to-Canadian dollar exchange rate.
Unchanged in rate, extended by one year to 2031. Along with the third-quarter report, the board declared a fourth-quarter dividend of $0.665 per share, up 3.91% (about 4%) from $0.640. That marks 53 straight years of dividend increases, though the raise sits at the bottom of the 4-6% target range for a second consecutive year while payout ratios adjust.
❓ Key Questions
How much more stock will Fortis sell under the ATM?
Fortis sold $260 million of common shares in the third quarter and plans to renew its at-the-market programme in early 2027. Investors need to know the total open-market equity required over 2027-2031 beyond dividend reinvestment.
What are the credit rating cash-flow ratios under the $32.2B plan?
In the 2026-2030 plan, Fortis projected an average S&P funds-from-operations-to-debt ratio of 12.4%. Management has not yet disclosed where that ratio sits under the $3.4 billion larger capital plan.
How much of Tilbury 1B sits inside the new five-year plan?
British Columbia approved up to $2.2 billion for the Tilbury Phase 1B gas project in July 2026, alongside an Indigenous equity partnership. Management did not specify the exact dollar amount included in the 2027-2031 budget or the partner's share.
What profit boost will the Tucson rate order deliver in 2027?
The Arizona administrative law judge recommended a 9.65% return on equity and a formula rate for Tucson Electric Power starting December 1, 2026. Investors need to know how much unrecovered rate base this order brings into 2027 earnings.