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Energy services holding company AGL Resources Inc. (GAS - Analyst Report) 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.


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. , ONEOK Inc. (OKE - Analyst Report) and Piedmont Natural Gas Co. Inc. (PNY - Snapshot Report). While Delta holds a Zacks Rank #1 (Strong Buy), ONEOK and Piedmont carry a Zacks Rank #2 (Buy).

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