AGL Resources Q2 Earnings Miss Estimates, Guidance Intact

Energy services holding company AGL Resources Inc. GAS reported weak second-quarter 2015 earnings primarily due to milder temperatures than the year-ago quarter. To explain it in details, we need to mention that since the company's basic operation is distributing natural gas, a warmer weather led to lower demand for the commodity used for room heating purposes and hurt AGL Resources' distribution business.  

AGL Resources – 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 39 cents (excluding wholesale services and discontinued operations). The bottom line missed the Zacks Consensus Estimate of 42 cents and decreased 2.5% from the year-ago adjusted profit of 40 cents.
 

 

Total operating revenues, at $674 million, were down by 24.2% from the year-ago level of $889 million.  

Segmental Performance

Distribution Operations: The segment, comprising seven utilities, reported earnings before interest and taxes (EBIT) of $106 million, down from $110 million in the second quarter of 2014. Warmer weather during the quarter hurt the results.

Retail Operations: Comprising SouthStar Energy Services, Nicor Services, Nicor Solutions and Nicor Advanced Energy, this segment achieved an EBIT of $17 million, in line with the year-earlier quarter. The quarter's performance gets hampered to some extent by warmer-than-normal temperature.

Wholesale Services: The unit, which includes Sequent Energy Management, reported a loss of $8 million against profit of $24 million in the prior-year quarter. Weak commercial activity led to the underperformance.

Midstream Operations: This segment, mainly comprising natural gas storage facilities, reported a loss of $2 million, narrower than the year-ago quarter loss of 7 million.

Operating Expenses

The company's total operating cost was $567 million, reflecting a decrease of 24.4% from $750 million in the year-ago quarter.

Guidance    

Management retained the 2015 earnings guidance – excluding wholesale services – at $2.70–$2.80 per share.

Zacks Rank

AGL Resources currently sports a Zacks Rank #1 (Strong Buy), implying that the stock is expected to outperform the broader U.S. equity market over the next one to three months.

Investors can also consider other players in the energy sector like Linn Energy LLC LINE, Western Gas Equity Partners LP WGP and Cheniere Energy Inc. LNG. These stocks also carry a Zacks Rank #1.

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