Gas distributor Nicor Inc. (GAS) reported better-than-expected fourth quarter results, reflecting improved operating income in the company’s gas distribution and other energy-related businesses on the back of higher rates and cost control. This was partially offset by lower operating income in its shipping business.

Earnings per share came in at $1.21, 21 cents above the Zacks Consensus Estimate and 16 cents above the prior-year period. However, revenue was down more than 26% year-over-year to $768.1 million, as sales declined in the Gas Distribution and Shipping segments due to lower natural gas deliveries on the back of warmer weather.

Gas Distribution

The segment operating income for the most recent quarter was $51.3 million, a healthy increase from the $41.0 million achieved during the fourth quarter of 2008. The positive comparison can be attributed to higher gas distribution margin (on the back of base rate hike) in tandem with lower operating and maintenance costs.

Early last year, Nicor got the nod from Illinois regulators (the company’s operations are centered in northern Illinois) to increase rates by approximately $69 million. During the fourth quarter, Nicor got clearance for an additional $11 million hike, which further helped the company’s gas-distribution business.

Shipping

Shipping operating income was down 33.2% year-over-year to $13.5 million. The main reasons for the underperformance were lower operating revenues, partially offset by lower operating costs. The decline in operating revenues were due to lower volumes shipped and lower average rates, while decreased operating expenses were primarily attributable to lower transportation-related costs, lower charter costs and lower payroll and benefit-related costs.

Other Energy Ventures

Operating profit came in at $26.5 million, up $13.8 million year-over-year. The year-over-year increase came on the back of higher operating income in the company’s retail energy-related products and services businesses as well as wholesale natural gas marketing business.

Guidance

For 2010, Nicor expects earnings per share between $3.10 and $3.30.

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