Energy services holding company AGL Resources Inc. GAS reported strong third-quarter 2015 earnings primarily due to a spurt in commercial activity on the back of favorable natural gas price spreads. 

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 adjusted earnings per share of 25 cents. The bottom line beat the Zacks Consensus Estimate of 20 cents and also improved from the year-ago adjusted profit of 22 cents.

However, total operating revenues, at $584 million were slightly below the year-ago figure of $589 million.

Segmental Performance

Distribution Operations: The segment, comprising seven utilities, reported earnings before interest and taxes (EBIT) of $86 million, down from $89 million in the third quarter of 2014.

Retail Operations: Comprising SouthStar Energy Services, Nicor Services, Nicor Solutions and Nicor Advanced Energy, this segment achieved an EBIT of $11 million as against just $5 million a year ago.

Wholesale Services: The unit, which includes Sequent Energy Management, reported earned $18 million for the quarter, turning around from the loss of $7 million incurred in the corresponding period of 2014.

Midstream Operations: This segment, mainly comprising natural gas storage facilities, reported a loss of $16 million, wider than last year’s loss of $4 million.

Operating Expenses

The company’s total operating cost was $525 million, reflecting an increase of 2.1% from $514 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 #3 (Hold).

Meanwhile, one can look at better-ranked players in the same industry like Atmos Energy Corp. ATO, Chesapeake Utilities Corp. CPK and The Laclede Group Inc. LG. All these stocks sport a Zacks Rank #2 (Buy).

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