AGL Resources Earnings Boosted by Cold Weather - Analyst Blog

Energy services holding company AGL Resources Inc. GAS reported strong first quarter 2014 results, propped up by higher usage on the back of lower-than-expected temperatures.

AGL Resources – which became the largest domestic natural gas-only distribution entity with about 4.5 million customers across seven states following the Dec 2011 acquisition of Naperville, IL-based Nicor Inc. – announced earnings per share of $2.44, way above the Zacks Consensus Estimate of $1.85 and the year-ago profit of $1.31 per share.

Total operating revenues, at $2,563.0 million, were comfortably ahead of the Zacks Consensus Estimate of $1,716.0 million and were also up from the year-ago level of $1,709.0 million.

Segmental Performance

Distribution Operations: The segment, comprising seven utilities, reported earnings before interest and taxes (EBIT) of $239.0 million, up from $218.0 million achieved during the first quarter of 2013. The result was positively influenced by unusually cold weather that translated into heightened demand for AGL Resources' services.

Retail Operations: Comprising SouthStar Energy Services, Nicor Services, Nicor Solutions and Nicor Advanced Energy, this segment achieved an EBIT of $82.0 million against a profit of $70.0 million in the year-earlier period. The quarter's performance benefited from a colder-than-normal winter.

Wholesale Services: The unit, which includes Sequent Energy Management, reported a profit of $293.0 million, a massive improvement from the $15.0 million recorded in the prior-year quarter. Strong commercial activity, especially in the Northeast and Midwest regions, buoyed the segment's performance.

Midstream Operations: This segment, mainly comprising natural gas storage facilities, reported a loss of $3.0 million, as against an EBIT of $2.0 million earned during the first quarter of 2013. The decline was on account of higher operating expenses.

Cargo Shipping: This segment broke even in the reported quarter, down $2.0 million from the year-earlier period.

Guidance

Following the robust first quarter results, management bumped its 2014 earnings guidance – excluding wholesale services – to $2.80–$2.90 per share, up from the previous forecast of $2.70–$2.80.

Zacks Rank

AGL Resources currently retains a Zacks Rank #1 (Strong Buy).

Some other stocks worth considering in the same sector include Delta Natural Gas Co. Inc. DGAS, ONEOK Inc. OKE and Piedmont Natural Gas Co. Inc. PNY. While Delta holds a Zacks Rank #1 (Strong Buy), ONEOK and Piedmont carry a Zacks Rank #2 (Buy).