AGL Resources, Inc. (GAS) - Bear of the Day

We are maintaining our Underperform recommendation on AGL Resources, Inc. (GAS) with a target price of $35. We expect shareholder sentiment towards 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.

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 13.1x.

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