AGL Resources Weak Commercial Activity Hurts Q3 Earnings
Energy services holding company AGL Resources Inc. (GAS) reported lower-than-expected third-quarter 2014 earnings due to lower commercial activities in its prime operating regions. Higher marketing cost along with lower contracted firm rates at the storage facilities also hurt the results. The negatives were, however, partially compensated by customer growth.
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 22 cents (excluding wholesale services and discontinued operations). The bottom line missed the Zacks Consensus Estimate of 24 cents.
However, earnings increased 5% from the year-ago adjusted profit of 21 cents per share.
Total operating revenues, at $589 million, were up from the year-ago level of $574 million.
Segmental Performance
Distribution Operations: The segment, comprising seven utilities, reported earnings before interest and taxes (:EBIT) of $89 million, up from $77 million in the third quarter of 2013. Increased customers along with higher revenue from regulatory infrastructure programs led to the improvement.
Retail Operations: Comprising SouthStar Energy Services, Nicor Services, Nicor Solutions and Nicor Advanced Energy, this segment achieved an EBIT of $5 million against $6 million in the year-earlier period, owing to higher marketing cost.
Wholesale Services: The unit, which includes Sequent Energy Management, reported a loss of $7 million, wider than the year-ago loss of $2 million. Decreased commercial activity in the prime operating regions hurt the segment’s results.
Midstream Operations: This segment, comprising mainly natural gas storage facilities, reported a loss of $4 million, also wider than the prior-year loss of $1 million. A dip in contracted firm rates at the company’s storage regions hampered the performance.
Operating Expenses
The company’s total operating cost was recorded at $514 million, reflecting an increase of 2% from $504 million in the year-ago quarter.
Guidance
Management lowered its 2014 earnings guidance – excluding wholesale services – to $2.60–$2.70 per share from the prior projection of $2.80–$2.90 per share.
Zacks Rank
AGL Resources currently carries a Zacks Rank #4 (Strong Sell), implying that it will underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Sandridge Mississippian Trust II (SDR), PBF Logistics LP (PBFX) and Alon USA Partners, LP (ALDW). All these stocks sport a Zacks Rank #1 (Strong Buy).
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