Fortis ( NYSE: FTS ) -0.7% in Thursday's trading after UBS downgraded shares to Sell from Neutral with a C$56 price target, cut from C$61, citing significant regulatory headwinds in Arizona and New York, which are both Tier 5 regulatory jurisdictions.
The rate case risk likely will limit Fortis' ( FTS ) ability to accelerate rate base growth beyond current guidance of 6%/year, vs. average growth for the utility sector improving to 6%-8% with best in class companies growing 9%-10% over the next five years, according to UBS analyst Ross Fowler.
Fortis ( FTS ) filed an Arizona rate case last week which Fowler believes significantly raises regulatory risk and likely prove a material overhang to the stock's performance over the next year, given Pinnacle West's latest rate case outcome in the state.
As part of a broader research note on North American Power and Utilities, Fowler also downgraded Duke Energy ( DUK ), Ameren ( AEE ) and Evergy ( EVRG ) to Neutral from Buy.
Citing relative valuation, Wells Fargo recently downgraded Fortis to Underweight .
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Fortis cut to Sell at UBS on 'significant' regulatory headwinds