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Energy services holding company AGL Resources Inc. (GAS - Analyst Report) reported strong second quarter 2013 earnings, due to higher energy use on the back of lower-than-expected temperatures, as against the unusually warm climate of the year ago period.

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 38 cents (excluding merger-related expenses and wholesale services), above the Zacks Consensus Estimate of 27 cents.

Moreover, AGL Resources’ earnings per share rose by 8.6% from an adjusted profit of 35 cents in the second quarter of the previous year.

Total operating revenues, at $904.0 million, were ahead of the Zacks Consensus Estimate of $740.0 million and were also up from the year-ago level of $686.0 million.

Segmental Performance

Distribution Operations: The segment, comprising seven utilities, reported earnings before interest and taxes (EBIT) of $109.0 million, up from $100.0 million achieved during the second quarter of 2012. The result was positively influenced by favorable weather conditions and enhanced revenues from AGL Resources’ regulatory infrastructure programs.  

Retail Operations: Comprising SouthStar Energy Services, Nicor Services, Nicor Solutions and Nicor Advanced Energy, this segment achieved an EBIT of $12.0 million down from the year- ago profit of $14.0 million in the year-earlier period. The quarter’s performance was hurt by higher operations and maintenance expenses.

Wholesale Services: The unit, which includes Sequent Energy Management, reported a profit of $11.0 million, as against a loss of $9.0 million recorded in the prior-year quarter. Hedge gain of roughly $5.0 million along with better commercial activities and lower operating expenses aided the result.

Midstream Operations: This segment broke even during the period under review as compared to a profit of $2.0 million in the year-ago period. The decline was on account of higher operating expenses along with volatile natural gas prices.

Cargo Shipping: This segment generated loss of $1.0 million in the reported quarter, in line with the year-earlier period.

Guidance

AGL Resources management projects its earnings for 2013 to follow the high end of the range $2.50 - $2.70 per share that was announced previously.

Zacks Rank

AGL Resources currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

There are certain other natural gas distribution utilities like Chesapeake Utilities Corporation (CPK - Snapshot Report), Questar Corp. (STR - Analyst Report) and MDU Resources Group Inc. (MDU - Snapshot Report) that offer value and are worth buying now. All these companies sport a Zacks Rank #2 (Buy).
 

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