On Dec 27, Zacks Investment Research downgraded energy services holding company AGL Resources Inc. (GAS), to a Zacks Rank #4 (Sell).
Why the Downgrade?
The Energy Information Administration (EIA), which provides official energy statistics from the U.S. government, in its latest short-term energy outlook reported that the temperature during the rest of the winter will be less icy and warmer than the previous year. This will lower consumer spending for natural gas for space heating purposes.
With lower demand for the commodity, we don’t expect AGL Resources to earn significantly for its shareholders as the company’s prime business is natural gas distribution.
Moreover, an adverse decision by the Federal Energy Regulatory Commission (FERC) in pending rate cases may negatively impact AGL Resources’ earnings. Additionally, the company’s inability to comply with various laws and regulations and to obtain fair and timely rate relief along with requisite regulatory approvals could have a negative impact on its future earnings and growth.
For a stock ridden with challenges, the Zacks Consensus Estimate for the fourth quarter of 2014 fell more than 6% to 77 cents per share over the last 30 days. Moreover, for the full year, the Zacks Consensus Estimate declined by more than 2% to $4.18 per share over the same time frame as half of the estimates (1 out of 2 estimates) were revised downward.
Stocks to Consider
One can consider better-ranked players in the energy sector like Sandridge Mississippian Trust II (SDR), SandRidge Mississippian Trust I (SDT) and Seadrill Partners LLC (SDLP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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