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Factors Likely to Shape Shell (RDS.A) This Earnings Season
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Royal Dutch Shell plc is set to announce third-quarter 2018 results on Nov 1, before the opening bell.
In the preceding three-month period, the Hague-based supermajor reported weaker-than-expected results owing to lacklustre performance from its downstream segment. However, coming to earnings surprise history, the Anglo-Dutch energy company is on a firm footing, having surpassed earnings estimates in three of the last four quarters, with an average positive surprise of 0.67%.
Investors are keeping their fingers crossed, in expectation of the energy giant beating earnings estimates this time around. The Zacks Consensus Estimate of $1.43 for the third quarter has been revised upward by 3 cents in the past 30 days. This reflects a year-over-year increase of 45.9%.
Let’s delve deeper into the factors that are likely to influence Shell’s earnings in the to-be-reported quarter.
Factors at Play
Average West Texas Intermediate (WTI) crude prices were recorded at $70.98, $68.06 and $70.23 per barrel in the month of July, August and September 2018, respectively, per data from the U.S. Energy Information Administration (EIA). These prices were considerably higher than the year-ago respective prices of $46.63, $48.04 and $49.82. Notably, oil prices were fueled by concerns over U.S. sanctions on Iran, OPEC’s efforts to tighten the market and strong global demand.
Natural gas prices also fared well, following improving clean energy demand. The average monthly spot prices of the commodity for the respective months of third-quarter 2018 were $2.83, $2.96 and $3.00 per Million Btu, representing healthier prices than third-quarter 2017.
Shell’s $50-billion buyout of BG Group boosted its strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. In the last reported quarter, the company’s integrated gas earnings almost doubled on the back of production and pricing gains.
The upstream segment of the company will surely benefit from higher commodity price realizations. However, since the past several quarters, Shell has been bearing the brunt of reduced volumes due to its aggressive divestment deals. Lower production volumes may somewhat neutralize the positive impact of rising commodity prices.
Notably, Shell is concentrating on modernizing and upgrading refineries by using superior technologies to derive high-value light products. The company plans to make a yearly investment of around $7-$9 billion in the downstream segment, forecasting a return on average capital employed (ROACE) of more than 15%. However, Shell’s downstream segment might be impacted, as crack spreads have narrowed in the quarter vis a vis the prior-year period. This is likely to lower year-over-year refining margins, thereby weakening downstream income of the company.
Earnings Whispers
Per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. That is not the case here as you will see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at $1.43.
Zacks Rank: Shell currently holds a Zacks Rank #3. You can seethe complete list of today’s Zacks #1 Rank stocks here. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.
Conversely, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here are a few firms from the energy space that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the quarter to be reported.
Enbridge Inc. (ENB - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1. The firm is expected to release third-quarter earnings on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Carrizo Oil and Gas, Inc. has an Earnings ESP of +0.18% and carries a Zacks Rank #2. The company is anticipated to release quarterly results on Nov 5.
Denbury Resources Inc. has an Earnings ESP of +10.15% and a Zacks Rank #3. The company is anticipated to release quarterly numbers on Nov 6.
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Factors Likely to Shape Shell (RDS.A) This Earnings Season
Royal Dutch Shell plc is set to announce third-quarter 2018 results on Nov 1, before the opening bell.
In the preceding three-month period, the Hague-based supermajor reported weaker-than-expected results owing to lacklustre performance from its downstream segment. However, coming to earnings surprise history, the Anglo-Dutch energy company is on a firm footing, having surpassed earnings estimates in three of the last four quarters, with an average positive surprise of 0.67%.
Royal Dutch Shell PLC Price and EPS Surprise
Royal Dutch Shell PLC Price and EPS Surprise | Royal Dutch Shell PLC Quote
Investors are keeping their fingers crossed, in expectation of the energy giant beating earnings estimates this time around. The Zacks Consensus Estimate of $1.43 for the third quarter has been revised upward by 3 cents in the past 30 days. This reflects a year-over-year increase of 45.9%.
Let’s delve deeper into the factors that are likely to influence Shell’s earnings in the to-be-reported quarter.
Factors at Play
Average West Texas Intermediate (WTI) crude prices were recorded at $70.98, $68.06 and $70.23 per barrel in the month of July, August and September 2018, respectively, per data from the U.S. Energy Information Administration (EIA). These prices were considerably higher than the year-ago respective prices of $46.63, $48.04 and $49.82. Notably, oil prices were fueled by concerns over U.S. sanctions on Iran, OPEC’s efforts to tighten the market and strong global demand.
Natural gas prices also fared well, following improving clean energy demand. The average monthly spot prices of the commodity for the respective months of third-quarter 2018 were $2.83, $2.96 and $3.00 per Million Btu, representing healthier prices than third-quarter 2017.
Shell’s $50-billion buyout of BG Group boosted its strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. In the last reported quarter, the company’s integrated gas earnings almost doubled on the back of production and pricing gains.
The upstream segment of the company will surely benefit from higher commodity price realizations. However, since the past several quarters, Shell has been bearing the brunt of reduced volumes due to its aggressive divestment deals. Lower production volumes may somewhat neutralize the positive impact of rising commodity prices.
Notably, Shell is concentrating on modernizing and upgrading refineries by using superior technologies to derive high-value light products. The company plans to make a yearly investment of around $7-$9 billion in the downstream segment, forecasting a return on average capital employed (ROACE) of more than 15%. However, Shell’s downstream segment might be impacted, as crack spreads have narrowed in the quarter vis a vis the prior-year period. This is likely to lower year-over-year refining margins, thereby weakening downstream income of the company.
Earnings Whispers
Per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. That is not the case here as you will see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at $1.43.
Zacks Rank: Shell currently holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.
Conversely, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here are a few firms from the energy space that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the quarter to be reported.
Enbridge Inc. (ENB - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1. The firm is expected to release third-quarter earnings on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Carrizo Oil and Gas, Inc. has an Earnings ESP of +0.18% and carries a Zacks Rank #2. The company is anticipated to release quarterly results on Nov 5.
Denbury Resources Inc. has an Earnings ESP of +10.15% and a Zacks Rank #3. The company is anticipated to release quarterly numbers on Nov 6.
3 Medical Stocks to Buy Now
The greatest discovery in this century of biology is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating revenue, and cures for a variety of deadly diseases are in the pipeline.
So are big potential profits for early investors. Zacks has released an updated Special Report that explains this breakthrough and names the best 3 stocks to ride it.
See them today for free >>