Energy services holding company
AGL Resources Inc.
) reported mixed second quarter 2012 results, owing to better
performing Distribution and Retail segments, partially offset by
the difficult market scenario and steeper operating expenses.
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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 30 cents, surpassing the Zacks
Consensus Estimate of 28 cents, while falling 9.1% from 33 cents
earned in the comparable quarter last year.
Total operating revenues, at $686.0 million, were shy of the Zacks
Consensus Estimate of $869.0 million but were up from the year-ago
level of $375.0 million.
This segment, comprised of seven utilities, witnessed earnings
before interest and taxes (EBIT) of $100.0 million, up from $74.0
million obtained during the second quarter of 2011. The positive
comparison can be attributed to contributions from the inclusion of
AGL's 'Retail' segment - made up of SouthStar Energy Services,
Nicor Services, Nicor Solutions and Nicor Advanced Energy -
achieved an EBIT of $14.0 million, up substantially from an income
of $1.0 million in the year-earlier period. The quarter's
performance benefited from the addition of a retail business unit
from Nicor along with lower transportation and gas costs.
The segment that includes Sequent Energy Management reported a loss
of $9.0 million, wider than the loss of $5.0 million recorded in
the prior-year quarter. The underperformance was primarily due to a
fall in the commercial activity as a result of reduced storage and
The earnings contribution from AGL's other businesses - Midstream
Operations and Cargo Shipping - were insignificant.
Management stated that the unfavorable weather conditions that
prevailed in the first half of 2012 will likely generate lower
earnings results for 2012 than the previous guidance range of
$2.80-$2.95 per diluted share.
Rating & Recommendation
Another natural gas distributor - Tulsa, Oklahoma-based
) - reported second-quarter 2012 earnings of 29 cents per diluted
share, missing our projection of 34 cents per diluted share.
AGL Resources currently retains a Zacks #4 Rank (short-term Sell
rating). We are also maintaining our long-term 'Underperform'
recommendation on the stock.
We expect shareholder sentiment toward AGL Resources to remain
lukewarm, considering its investment in higher-risk unregulated
operations, ongoing regulatory uncertainties and the challenging