Bull Of The Day: AGL Resources

Jun.18.14 | About: AGL Resources (GAS)

In case you haven’t noticed there’s a bit of an energy boom taking place in the U.S. All the while prices on nat gas and crude have been on the rise. That’s a recipe for successful companies and also a recipe for you to profit. While some aspects of that business can be very risky, there are other aspects that are bread and butter. One of those aspects is the distribution business. The companies that get the nat gas into your house to heat your water and cook your food. One such company is our Bull of the Day, AGL Resources (NYSE:GAS).

AGL is a freshly minted Zacks Rank #1 (Strong Buy). The company operates in five core areas; distribution, retail, wholesale, midstream, and shipping. The company serves 4.5 million customers across seven states. Their performance is driven by customer growth and usage, balanced regulatory outcomes and prudent infrastructure investment.

AGL expects rate base growth of approximately 4.5 – 5.5% and targets five-year net income CAGR of 4 – 6%. The company sees upside potential in non-utility business and has new opportunities such as pipeline investment expected to provide for additional regulated earnings.

Over the last 60 days two analysts have raised their estimates for the current year earnings, pushing consensus up to $4.38 per share from $3.00. This is a big reason for the top Zacks Rank. As far as the rest of the sector goes, the industry is in the top 16% of our Zacks Industry Rank.

If you’re looking for slow and steady growth, AGL Resources may be a great idea. Take a look at the price and consensus chart over the last several years. After seeing estimates dip down and bottom out towards the end of 2012, AGL’s estimates have steadily increased along with the stock price. Most recently the revisions for this year have been through the roof, providing a huge boost for the stock over the last year and a half.

The technical picture is very encouraging as well. There has been a consolidation taking place since the stock hit a new 52 week high and pulled back in early May. It’s healthy for a stock to pull back and take a breather after making the run that AGL has made over the last six months. After hitting a low just above $45 during mid-February the stock caught a bid simultaneously along with a stochastic buy signal from an oversold position. After breaking above the 25 day moving average shifted by 5 days (25x5) the stock went on a tear. The stock shot up from $47 to $54 in a matter of a few short weeks.

Currently the stock is beginning to carve out a bullish pennant. Note the lower highs coupled with the higher lows. A breakout above this flag pattern puts $60 immediately in sight. With the stock sitting just above the 25x5 it gives it a bullish bias.