AGL Resources, Inc. (GAS)

We are maintaining our Underperform recommendation on AGL Resources, Inc. (GAS - Analyst Report) with a target price of $35. We expect shareholder sentiment toward the company to remain lukewarm, considering its investment in higher-risk unregulated operations, ongoing regulatory uncertainties and the challenging economic environment.

AGL's earnings are likely to suffer in 2012 due to a less-than-favorable outlook at its wholesale segment. Additionally, the inclusion of the shipping operations (post Nicor acquisition) has left AGL with a weak business, thereby heightening its risk profile. Partially offsetting these negatives are the company's large and stable customer profile, consistent dividend growth and strong liquidity position.

Considering these factors, we see little reason for investors to own the stock and therefore maintain our Underperform recommendation. Our $35 price objective reflects a 2012 P/E multiple of 12.7x.

AGL Resources, Inc. (GAS) : FULL ANALYST REPORT

Read the full analyst report on AGL