Energy services holding company AGL Resources Inc. (GAS) reported weaker-than-expected fourth quarter 2011 results, hurt by warm weather and low natural gas prices.

The company – which became the largest domestic natural gas-only distribution entity with about 4.5 million customers across seven states following the December 2011 acquisition of Naperville, Illinois-based Nicor Inc. – announced earnings per share (excluding merger-related expenses) of 87 cents, below the Zacks Consensus Estimate of 92 cents.

However, compared with the year-earlier period, AGL’s adjusted earnings per share rose by a penny (from 86 cents to 87 cents) due to the inclusion of Nicor Gas.

Total operating revenues, at $790.0 million, were shy of the Zacks Consensus Estimate of $925.0 million but were up from the year-ago level of $665.0 million.

For its fiscal year ended December 31, 2011, AGL reported profit of $2.92 per share on revenues of $2,338.0 million.

Segmental Performance

Distribution Operations: The segment earnings before interest and taxes (EBIT) for the most recent quarter was $127.0 million, up from $94.0 million achieved during the fourth quarter of 2010. The positive comparison can be attributed to contributions from the inclusion of Nicor Gas.

Retail Operations: AGL’s ‘Retail’ segment achieved an EBIT of $29.0 million versus income of $37.0 million in the year-earlier period. The main reasons for the underperformance were lower average customer usage, warm weather compared to the year-earlier period and adverse inventory adjustments on account of weak natural gas prices.

Wholesale Services: EBIT came in at $14.0 million, up $3.0 million year over year. The increase came on the back of storage and transportation hedge gains.

The earnings contribution from AGL’s other businesses – Midstream Operations and Cargo Shipping – were insignificant.

Guidance

Management gave its EPS guidance range for fiscal 2012 at $2.80-$2.95.

Dividend Hike

Recently, AGL announced a 2.2% increase in its annual dividend to $1.84 per share.

Rating & Recommendation

AGL Resources, which competes on a large scale with gas distributors like Atmos Energy Corporation (ATO), currently retains a Zacks #5 Rank (short-term Strong Sell rating). We are also maintaining our long-term ‘Underperform’ recommendation on the stock.

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