On Jan 16, 2014, Pivotal LNG, an affiliate of the energy services holding company, AGL Resources Inc. (GAS), inked a deal with United Parcel Service, Inc. (UPS) to supply liquefied natural gas (LNG) to the fleet of the latter in Jacksonville, Fla.
This marks the second LNG contract between the two and the third UPS facility that Pivotal would be supplying. Under the first LNG supply contract – signed in Apr 2013 – the AGL Resources subsidiary supplies LNG to United Parcel’s Nashville and Knoxville facilities.
The new LNG deal is in tune with United Parcel’s announcement that it plans to pump up LNG use in its transportation operations. The wholly owned subsidiary of AGL Resources is a supplier of LNG across the U.S. Evidently, such plans by UPS to boost LNG use is a boon for Pivotal.
AGL Resources is a premier electric utility with principal business of gas distribution. We positively view the company’s relatively low risk earnings growth and an expanding dividend that yields a solid 4.1%.
However, a few factors go against the company’s positive outlook. The wholesale segment of AGL Resources continues to be less than favorable. The unit is expected to be under pressure given the challenging outlook based on narrow spreads for transportation and storage. Moreover, the company’s shipping segment results may also remain weak in the upcoming quarters.
The AGL Resources stock trades in a 52-week range of 38.86 to 49.31. On Jan 17, the stock closed at $46.87 per share after reaching an intraday high of $47.04 per share.
Atlanta, Ga.-based AGL Resources currently holds a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked stocks in the industry such as Questar Corporation (STR) and National Fuel Gas Company (NFG). Both these stocks currently have a Zacks Rank #2 (Buy).
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