Energy services holding company
AGL Resources Inc.
(
GAS
) reported dull first quarter 2012 results, bruised by warm weather
and higher operating expenses.
The company -the largest domestic natural gas-only distribution
entity with about 4.5 million customers across seven states
following the December 2011 acquisition of Naperville,
Illinois-based Nicor Inc. - announced earnings per share (excluding
merger-related expenses) of $1.16, below the Zacks Consensus
Estimate of $1.32. Comparing year over year, the results
dropped 28.8% from $1.63.
Total operating revenues, at $1,404.0 million, were shy of the
Zacks Consensus Estimate of $1,573.0 million but were up from the
year-ago level of $878.0 million.
Segmental Performance
Distribution Operations:
This segment comprising seven utilities, witnessed earnings before
interest and taxes (EBIT) of $194.0 million, up from $141.0 million
achieved during the first quarter of 2011. The positive comparison
can be attributed to contributions from the inclusion of Nicor
Gas.
Retail Operations:
AGL's 'Retail' segment - made up of SouthStar Energy Services,
Nicor Services, Nicor Solutions and Nicor Advanced Energy -
achieved an EBIT of $60.0 million versus income of $68.0 million in
the year-earlier period. The main reasons for the underperformance
were warm weather compared to the year-earlier period and adverse
inventory adjustments on account of weak natural gas prices,
partially offset by a dip in transportation and gas costs.
Wholesale Services:
The segment that includes Sequent Energy Management reported EBIT
of $19.0 million, down from $33.0 million recorded in the
prior-year quarter. The decrease was primarily due to a fall in the
commercial activity as a result of reduced storage and
transportation spreads.
The earnings contribution from AGL's other businesses -
Midstream Operations and Cargo Shipping - were insignificant.
Guidance
Management stated that the unfavorable weather conditions of the
first quarter will likely generate lower earnings results for 2012
than the previous guided forecast of $2.80 to $2.95 per diluted
share.
Rating & Recommendation
AGL Resources, which competes on a large scale with gas
distributors like
ONEOK Inc.
(
OKE
) and
Atmos Energy Corporation
(
ATO
), currently retains a Zacks #4 Rank (short-term Sell rating). We
are also maintaining our long-term 'Underperform' recommendation on
the stock.
We expect the company's wholesale segment margin to be under
pressure in the foreseeable future due to lower volatility and
narrowing transportation/storage spreads. Moreover, AGL Resources'
investment in higher-risk unregulated operations and ongoing
regulatory uncertainties are other factors that temper the
company's outlook.
ATMOS ENERGY CP (
ATO
): Free Stock Analysis Report
AGL RESOURCES (
GAS
): Free Stock Analysis Report
ONEOK INC (
OKE
): Free Stock Analysis Report
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