Company Overview - ENGIE - Sponsored ADR (ENGIY) is part of the Utilities sector, which consists of 108 individual stocks and currently holds a Zacks Sector Rank of 3, indicating its relative strength among sector groups [2] - The Zacks Rank system identifies stocks with characteristics likely to outperform the market over the next one to three months, with ENGIE currently holding a Zacks Rank of 2 (Buy) [3] Performance Metrics - Over the past quarter, the Zacks Consensus Estimate for ENGIE's full-year earnings has increased by 5.7%, reflecting improved analyst sentiment and a stronger earnings outlook [4] - Year-to-date, ENGIE has returned approximately 40%, significantly outperforming the Utilities sector average return of 13.5% [4] - Within the Utility - Electric Power industry, which includes 59 stocks, ENGIE is also performing well, as this group has gained about 13.1% year-to-date [6] Comparative Analysis - Another Utilities stock, Fortis (FTS), has also outperformed the sector with a year-to-date increase of 22.1% and holds a Zacks Rank of 2 (Buy) [5] - Both ENGIE and Fortis are expected to continue their strong performance, making them noteworthy for investors interested in Utilities stocks [7]

Industry Overview - The Utility – Electric Power industry is transitioning to cleaner fuel sources and reducing carbon emissions, supported by government policies promoting sustainable power generation [1] - Utilities are investing in grid upgrades and improving transmission and distribution infrastructure to enhance resilience against severe weather events [1][3] - The industry is experiencing stable demand across economic cycles, with increased electricity consumption during extreme weather [3] Trends Impacting the Industry - Interest rates have declined from 5.25-5.50% to 4.25-4.50%, benefiting capital-intensive utilities by lowering borrowing costs for infrastructure investments [4] - Electricity production is projected to increase by 2.2% in 2025 and 2.3% in 2026, reaching 4,340 billion kilowatt-hours, driven by demand from commercial and industrial sectors [5] - The share of electricity generation from renewable sources is expected to rise from 23% in 2024 to 26% in 2026, aided by the Inflation Reduction Act [6] Company Highlights - CenterPoint Energy Inc. plans to invest $53 billion over the next 10 years to expand operations and meet rising electricity demand [19] - Fortis Inc. expects to invest $26 billion from 2025 to 2029, focusing on strengthening regulated electric and gas operations [23] - NiSource Inc. projects an investment of $19.4 billion for 2025-2029 to enhance its existing operations [27] Financial Performance and Valuation - The Utility Electric Power industry has gained 16.9% over the past 12 months, outperforming its sector's 14.2% increase but lagging behind the S&P 500's 22.7% gain [10] - The industry is currently trading at an EV/EBITDA of 14.37X, lower than the S&P 500's 17.02X and the Utility sector's 15.75X [13] - Long-term earnings growth estimates for CenterPoint Energy, Fortis, and NiSource are 7.8%, 5.13%, and 7.88% respectively, with respective dividend yields of 2.3%, 3.53%, and 2.58% [20][24][28]

Core Viewpoint - Fortis has demonstrated strong stock performance, with a 5.2% increase over the past month and a 20% gain since the beginning of the year, outperforming both the Zacks Utilities sector and the Zacks Utility - Electric Power industry [1][2]. Group 1: Stock Performance - Fortis shares reached a new 52-week high of $50.56 recently [1]. - The stock has consistently beaten earnings estimates, with the latest EPS reported at $0.55 against a consensus of $0.51 [2]. Group 2: Earnings Projections - For the current fiscal year, Fortis is projected to achieve earnings of $2.49 per share on revenues of $9.02 billion, reflecting a 4.18% increase in EPS and a 7.36% increase in revenues [3]. - The next fiscal year forecasts earnings of $2.58 per share on revenues of $9.34 billion, indicating year-over-year changes of 3.77% and 3.57%, respectively [3]. Group 3: Valuation Metrics - Fortis trades at 20 times the current fiscal year EPS estimates, which is above the peer industry average of 18.9 times [7]. - The stock's trailing cash flow multiple is 9.6 times, compared to the peer group's average of 8.1 times, and it has a PEG ratio of 3.91 [7]. Group 4: Zacks Rank and Style Scores - Fortis holds a Zacks Rank of 2 (Buy), supported by a positive earnings estimate revision trend [8]. - The stock has a Value Score of C, a Growth Score of B, and a Momentum Score of C, resulting in a combined VGM Score of B [6][8].

Group 1 - ENGIE - Sponsored ADR (ENGIY) is currently outperforming its peers in the Utilities sector with a year-to-date return of 42.1%, compared to the sector average of 11.5% [4] - The Zacks Rank for ENGIE is 2 (Buy), indicating a positive outlook based on earnings estimates and revisions, with a 4.2% increase in the consensus estimate for full-year earnings over the past three months [3] - The Utility - Electric Power industry, which includes ENGIE, has an average year-to-date return of 12%, showing that ENGIE is performing better than the industry average [6] Group 2 - Fortis (FTS) is another Utilities stock that has outperformed the sector with a year-to-date return of 17.8% and also holds a Zacks Rank of 2 (Buy) [4][5] - The Utilities sector is ranked 3 in the Zacks Sector Rank, which evaluates 16 different sector groups based on the average Zacks Rank of individual stocks [2] - Investors in the Utilities sector should monitor ENGIE and Fortis for their continued strong performance [7]

Financial Data and Key Metrics Changes - The company reported second quarter earnings per share (EPS) of $0.76, a $0.09 increase compared to the same period last year [5][13] - Year-to-date EPS was $1.76, reflecting a $0.16 increase over the same period last year [13] - Net earnings for the quarter were $384 million [13] - Capital expenditures for the first half of the year were nearly $3 billion [5][7] Business Line Data and Key Metrics Changes - Central Hudson contributed a $0.04 increase in EPS, driven by rate-based growth and a higher allowed return on equity (ROE) effective July 1, 2024 [14] - EPS at UNS Energy remained unchanged from the previous year, with increased transmission revenue offset by regulatory lag [14] - Western Canadian Utilities saw a $0.30 increase in EPS, primarily due to rate base growth [14] - EPS for Fortis Alberta was tempered by the expiration of a PVR efficiency mechanism and a lower allowed ROE of 8.97% effective January 1, 2025 [14] Market Data and Key Metrics Changes - Tucson Electric Power (TEP) filed a general rate application seeking new retail rates effective September 1, 2026, with a proposed rate base of $4.3 billion, an increase of approximately $750 million since the last rate case [20][21] - The company achieved a 34% reduction in Scope 1 greenhouse gas emissions compared to 2019 levels through 2024 [6] Company Strategy and Development Direction - The company is focused on delivering safe and reliable energy while advancing its growth strategy, with a projected rate base increase of approximately $14 billion to $53 billion by 2029, supporting average annual growth of 6.5% [7][8] - The company plans to convert approximately 800 megawatts of coal-fired generation at the Springerville generating station to natural gas by 2030, aiming to be coal-free by 2032 [9][10] - The company remains committed to annual dividend growth guidance of 4% to 6% through 2029 [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong results for the first half of the year and progress on regulatory fronts, positioning the company well for the remainder of 2025 and beyond [23] - The company is preparing for its next integrated resource plan in Arizona, which will address changing load curves and resource needs [62] Other Important Information - Fitch assigned Fortis a first-time BBB+ credit rating, enhancing its credit profile and supporting cost-effective capital market funding options [19] - The company is pursuing various opportunities to support load growth and improve grid resilience [11] Q&A Session Summary Question: Regarding data center opportunity in Arizona - Management confirmed that the first 300 megawatts will utilize existing and planned capacity, with the second 300 megawatts expected to be in service by 2030 to 2031 [26][28] Question: Upside potential in Arizona and ITC - Management acknowledged significant upside potential in Arizona and ITC, with ongoing opportunities across the entire portfolio [29][30] Question: Springerville conversion costs - Management indicated that the costs of conversion are being evaluated in the context of the integrated resource plan, emphasizing affordability for customers [34][35] Question: Gas infrastructure outlook in BC - Management noted positive developments in LNG opportunities and ongoing regulatory processes for gas connections in BC [40][41] Question: Impact of recent legislation on Fortis - Management stated that while there are limited short-term impacts from recent legislation, longer-term implications on renewable energy and storage development will be assessed [50][54] Question: Need for interstate pipeline capacity into Arizona - Management confirmed discussions regarding gas supply for the Springerville repowering project, indicating a growing need for infrastructure in the long term [60][62]

Financial Data and Key Metrics Changes - The company reported second quarter earnings per share (EPS) of $0.76, a $0.09 increase compared to the same period last year [4][11] - Year-to-date EPS through June was $1.76, reflecting a $0.16 increase over the same period last year [11] - Net earnings for the quarter were $384 million [11] - The company raised over $1 billion in debt to repay borrowings and fund its capital program [15] - Fitch assigned a first-time BBB+ credit rating to the company, supporting cost-effective capital market funding options [16] Business Line Data and Key Metrics Changes - Central Hudson contributed a $0.04 increase in EPS, driven by rate-based growth and a higher allowed return on equity (ROE) effective July 1, 2024 [12] - EPS contribution from UNS Energy remained unchanged from the previous year, with increased transmission revenue offset by regulatory lag [12] - Western Canadian Utilities saw a $0.30 increase in EPS, largely due to rate base growth [12] - The Corporate and Other segment experienced a decrease in EPS due to timing of income tax recoveries and higher finance costs [14] Market Data and Key Metrics Changes - Tucson Electric Power (TEP) filed a general rate application seeking new retail rates effective September 1, 2026, with a proposed rate base of $4.3 billion, an increase of approximately $750 million since the last rate case [17][18] - The application aims to phase out certain adjuster mechanisms and request an annual formula rate adjustment [19] Company Strategy and Development Direction - The company is focused on delivering reliable and affordable service to customers while providing compelling long-term returns to shareholders [21] - A significant capital expenditure of nearly $3 billion was made in the first half of the year, with plans for continued investment in grid upgrades and new energy resources [4][18] - The company aims to convert approximately 800 megawatts of coal-fired generation to natural gas by 2030, with a target to be coal-free by 2032 [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong results for the first half of the year and progress on regulatory fronts, positioning the company well for the remainder of 2025 and beyond [21] - The company is reassessing its 2030 and 2035 interim greenhouse gas targets and will share results once complete [8] - Management highlighted ongoing negotiations for additional capacity to support data center demands in Arizona [9] Other Important Information - The company achieved a 34% reduction in Scope 1 greenhouse gas emissions compared to 2019 levels [5] - The first phase of the Roadrunner reserve battery storage project was placed in service, facilitating the integration of renewable energy onto the electric grid [6] Q&A Session Summary Question: Regarding the data center opportunity in Arizona, how quickly could generation be developed to support these assets? - Management indicated that the first 300 megawatts would utilize existing and planned capacity, with the goal to have it operational by 2027. The second phase would go through an RFP process, aiming for service by 2030 to 2031 [25][27] Question: Is it fair to assume that the greatest upside potential is in Arizona and ITC? - Management confirmed that significant opportunities exist in Arizona and ITC, while also exploring additional prospects across the entire portfolio [28] Question: Can you comment on the Springerville position and its impact on the five-year plan? - Management acknowledged that the conversion of Springerville may take longer to achieve interim GHG targets but emphasized the affordability benefits for customers [32][34] Question: What are the latest thoughts on gas infrastructure in BC? - Management noted a positive outlook for LNG opportunities and ongoing regulatory processes for LNG storage tanks, with a review of CleanBC policies expected later this year [39] Question: Is UNS involved in discussions regarding new interstate pipeline capacity into Arizona? - Management confirmed ongoing discussions related to gas supply for the Springerville repowering project, emphasizing the need for additional infrastructure in the long term [61][64]

Financial Performance & Capital Plan - YTD June Capital Expenditures reached $2.9 billion, and the company is on track with its 2025 annual capital plan of $5.2 billion[17] - The 2025-2029 Capital Plan totals $26 billion, with 23% allocated to major capital projects[17] - The company forecasts a 5-Year Rate Base CAGR of 6.5%, growing from $39 billion in 2024 to $53 billion in 2029[17] - Q2 2025 EPS was $0.76, compared to $0.67 in Q2 2024, and YTD 2025 EPS was $1.76, compared to $1.60 YTD 2024[35] Strategic Initiatives & Growth Opportunities - TEP plans to convert 793 MW of coal-fired generation at the Springerville Generating Station to natural gas generation by 2030, supporting a coal-free generation mix by 2032[21] - An agreement was reached with a data center customer for ~300 MW of power demand ramping up in 2027, with potential for a total of 600 MW at the initial site and an additional 500-700 MW at a subsequent site[27] - MISO LRTP Tranche 2.1 represents a ~US$3.7-$4.2 billion investment opportunity for projects in Michigan, Minnesota, and Iowa[30] Dividend & Sustainability - The company provides annual dividend growth guidance of 4-6% through 2029[33] - Fortis has reduced scope 1 emissions by 34% to the end of 2024 relative to 2019 levels[89] - FortisBC will invest $690 million to help customers save 3.8 million gigajoules of gas and 115 GWh of electricity by the end of 2027[89]

Company Performance - Fortis reported quarterly earnings of $0.55 per share, exceeding the Zacks Consensus Estimate of $0.51 per share, and up from $0.49 per share a year ago, representing an earnings surprise of +7.84% [1] - The company posted revenues of $2.03 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.99%, compared to $1.95 billion in the same quarter last year [2] - Fortis has surpassed consensus EPS estimates four times over the last four quarters and topped consensus revenue estimates three times during the same period [2] Stock Performance - Fortis shares have increased approximately 17.8% since the beginning of the year, outperforming the S&P 500's gain of 7.8% [3] - The current consensus EPS estimate for the upcoming quarter is $0.59 on revenues of $2.08 billion, and for the current fiscal year, it is $2.49 on revenues of $9.02 billion [7] Industry Outlook - The Utility - Electric Power industry, to which Fortis belongs, is currently in the top 33% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

Core Insights - Fortis Inc. reported strong second quarter results for 2025, with net earnings of $384 million or $0.76 per common share, reflecting a $53 million increase from the same period in 2024 [3][8] - The company is executing a disciplined capital plan and regulatory growth strategy, positioning itself well for achieving its objectives for the year [3] Financial Performance - Net earnings for the first half of 2025 reached $883 million, or $1.76 per common share, an increase of $93 million compared to the same period in 2024 [4] - The increase in earnings was driven by rate base growth across utilities, including FortisBC Energy's Eagle Mountain Pipeline project and higher earnings at Central Hudson [3][4] - The weighted average number of common shares outstanding increased, largely due to the dividend reinvestment plan [5] Capital and Growth Updates - Fortis is on track with its $5.2 billion annual capital plan, having invested $2.9 billion in the first half of 2025 [6] - The Roadrunner Reserve 1 battery storage project, with a capacity of 200 MW, was placed in service, facilitating renewable energy integration [6] - Tucson Electric Power (TEP) plans to convert 793 MW of coal-fired generation to natural gas by 2030, which will not materially impact the current five-year capital plan [7] Regulatory Developments - TEP filed a general rate application for new rates effective September 1, 2026, requesting a net increase of US$172 million in retail revenue [13] - Central Hudson filed a joint proposal for a three-year rate plan with a continuation of a 9.5% allowed return on equity [14] Sustainability Efforts - Fortis achieved a 34% reduction in scope 1 greenhouse gas emissions through 2024 compared to 2019 levels [15] - The company aims for a coal-free generation mix by 2032 and a net-zero goal by 2050, although interim GHG reduction targets may take longer to achieve [16] Outlook - Fortis expects its $26.0 billion five-year capital plan to increase the midyear rate base from $39.0 billion in 2024 to $53.0 billion by 2029, with a compound annual growth rate of 6.5% [18] - The company anticipates long-term growth in rate base will drive earnings that support dividend growth guidance of 4-6% annually through 2029 [18]

Market Overview - Wall Street experienced a sharp retreat after the Federal Reserve decided to keep interest rates unchanged in the range of 4.25-4.50% [4][5] - Investor optimism faded following the announcement, leading to increased market volatility [1] - The uncertainty surrounding President Trump's impending tariff decisions is contributing to market fluctuations [1][7] Investment Recommendations - It is advisable to invest in safe-haven defensive stocks from the utility sector, including ONE Gas, Inc. (OGS), Fortis, Inc. (FTS), Northwest Natural Holding Company (NWN), and IDACORP, Inc. (IDA) [2] - These stocks are categorized as low-beta (beta greater than 0 but less than 1), making them suitable for investors seeking stability [3] Company Profiles ONE Gas, Inc. (OGS) - OGS is a regulated natural gas distribution utility serving over 2.3 million customers across Oklahoma, Kansas, and Texas [9] - Expected earnings growth rate for the current year is 9.7%, with a Zacks Consensus Estimate improvement of 0.2% over the last 60 days [11] - OGS has a beta of 0.80 and a current dividend yield of 3.68% [11] Fortis, Inc. (FTS) - Fortis operates in the electric and gas utility sector, primarily in Canada, the U.S., and the Caribbean [12] - The expected earnings growth rate for the current year is 4.2%, with a Zacks Consensus Estimate improvement of 0.8% over the last 60 days [12] - FTS has a beta of 0.48 and a current dividend yield of 3.63% [12] Northwest Natural Holding Company (NWN) - NWN builds and maintains natural gas distribution systems and invests in pipeline projects, serving customers in the U.S. and Canada [13] - The expected earnings growth rate for the current year is 23.6%, with a Zacks Consensus Estimate improvement of 1.4% over the last 60 days [14] - NWN has a beta of 0.53 and a current dividend yield of 4.83% [14] IDACORP, Inc. (IDA) - IDA is involved in the transmission, distribution, and sale of electricity services in southern Idaho and eastern Oregon [15] - The expected earnings growth rate for the current year is 6%, with a Zacks Consensus Estimate improvement of 0.3% over the last 60 days [15] - IDA has a beta of 0.56 and a current dividend yield of 2.81% [15]