AGL Resources Misses Consensus - Analyst Blog

By
A A A

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
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ATO , GAS , OKE

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
100%
0%

Most Active by Volume

139,392,686
  • $5.41 ▼ 18.52%
108,086,733
  • $17.04 ▲ 1.61%
88,411,032
  • $42.085 ▼ 1.19%
35,897,863
  • $101.79 ▲ 0.21%
34,635,836
  • $46.68 ▲ 0.34%
31,162,075
  • $4.36 ▲ 12.37%
31,086,421
  • $26.21 ▲ 0.61%
30,930,862
  • $17.09 ▼ 2.95%
As of 9/18/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com