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Will Shell's (RDS.A) Q4 Earnings Reverse the Previous Miss?
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Shell is set to release fourth-quarter results on Feb 3. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.40 per share.
Let’s delve into the factors that might have influenced the integrated energy behemoth’s results in the December quarter. But it’s worth taking a look at Shell’s previous-quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last-reported quarter, Europe’s largest oil company missed the consensus mark due to lower production. Shell had reported earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) of $1.06, below the Zacks Consensus Estimate by 35 cents.
RDS.A beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed twice, which resulted in a negative earnings surprise of 13.5%, on average.
Factors to Consider
Last month, Shell released a preliminary report for the October-December period, which cautioned that its marketing division, which includes the world's biggest network of petrol stations, will see earnings fall sequentially due to the Omicron-induced demand dip and some foreign exchange effects in Turkey. But the performance of the firm’s trading division — instrumental in helping the supermajor partly cushion the impact of the coronavirus-induced oil price slump — is likely to be “significantly higher” for the Integrated Gas business on the back of surging LNG prices. Now, let’s dig into some other segment-wise selected items from that release.
Upstream: According to the latest update, Shell’s upstream production fell by 7.2% on a year-over-year basis in the fourth quarter of 2021, at the midpoint of the guidance. The supermajor is estimating its output in the range of 2,150 to 2,250 MBOE/d compared to 2,371 MBOE/d a year ago. Tax charges are expected to hurt earnings in the range of $2.4-2.8 billion.
Integrated Gas: Shell’s LNG liquefaction volumes are expected in the range of 7.7 to 8.3 million tons, which translates into a decline of around 2.6%. Shell’s integrated gas production is also expected to decrease on a year-over-year basis to the range of 910,000 to 950,000 barrels of oil equivalent per day (BOE/d), or 930,000 BOE/d at the midpoint. It was 942,000 BOE/d in the fourth quarter of 2020. The decreases have been blamed on unscheduled maintenance, primarily in Australia.
Oil Products: The midpoint of management’s oil product sales guidance equates to 4.5 million barrels per day compared to 4.781 in the corresponding period of 2020. Refinery utilization is estimated between 69% and 73% against the year-ago quarter’s 72%. While refining margins improved in the December quarter, trading results are expected to be way below the third-quarter levels, pushing the unit in the red.
Chemicals: Chemical sales may be in the range of 3.3 to 3.6 million tons, while margins are likely to decrease considerably from the third quarter on narrowing base chemicals margin. Manufacturing plant availability is down between 74% and 78% (compared to 79% in the corresponding period of 2020). Overall, the segment is expected to report break-even earnings.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Shell is likely to beat estimates in the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Shell has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.40 per share each.
Zacks Rank: Shell currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.
While an earnings beat looks uncertain for Shell, here are some firms from the energy space that you may want to consider on the basis of our model:
Liberty Oilfield Services Inc. (LBRT - Free Report) has an Earnings ESP of +2.55% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 8.
LBRT beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed twice, which resulted in a negative earnings surprise of 48.7%, on average. Liberty Oilfield Services has lost around 1.5% in a year.
EQT Corporation (EQT - Free Report) has an Earnings ESP of +1.00% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 9.
EQT Corp. beat earnings estimates in each of the last four quarters — the earnings surprise being 129.5%, on average. The company has gained around 24.9% in a year.
PBF Energy Inc. (PBF - Free Report) has an Earnings ESP of +24.81% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 10.
PBF Energy has topped the Zacks Consensus Estimate by an average of 22.8% in the trailing four quarters, including a 148% beat in Q3. The company has rallied around 86.2% in a year.
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Will Shell's (RDS.A) Q4 Earnings Reverse the Previous Miss?
Shell is set to release fourth-quarter results on Feb 3. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.40 per share.
Let’s delve into the factors that might have influenced the integrated energy behemoth’s results in the December quarter. But it’s worth taking a look at Shell’s previous-quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last-reported quarter, Europe’s largest oil company missed the consensus mark due to lower production. Shell had reported earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) of $1.06, below the Zacks Consensus Estimate by 35 cents.
RDS.A beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed twice, which resulted in a negative earnings surprise of 13.5%, on average.
Factors to Consider
Last month, Shell released a preliminary report for the October-December period, which cautioned that its marketing division, which includes the world's biggest network of petrol stations, will see earnings fall sequentially due to the Omicron-induced demand dip and some foreign exchange effects in Turkey. But the performance of the firm’s trading division — instrumental in helping the supermajor partly cushion the impact of the coronavirus-induced oil price slump — is likely to be “significantly higher” for the Integrated Gas business on the back of surging LNG prices.
Now, let’s dig into some other segment-wise selected items from that release.
Upstream: According to the latest update, Shell’s upstream production fell by 7.2% on a year-over-year basis in the fourth quarter of 2021, at the midpoint of the guidance. The supermajor is estimating its output in the range of 2,150 to 2,250 MBOE/d compared to 2,371 MBOE/d a year ago. Tax charges are expected to hurt earnings in the range of $2.4-2.8 billion.
Integrated Gas: Shell’s LNG liquefaction volumes are expected in the range of 7.7 to 8.3 million tons, which translates into a decline of around 2.6%. Shell’s integrated gas production is also expected to decrease on a year-over-year basis to the range of 910,000 to 950,000 barrels of oil equivalent per day (BOE/d), or 930,000 BOE/d at the midpoint. It was 942,000 BOE/d in the fourth quarter of 2020. The decreases have been blamed on unscheduled maintenance, primarily in Australia.
Oil Products: The midpoint of management’s oil product sales guidance equates to 4.5 million barrels per day compared to 4.781 in the corresponding period of 2020. Refinery utilization is estimated between 69% and 73% against the year-ago quarter’s 72%. While refining margins improved in the December quarter, trading results are expected to be way below the third-quarter levels, pushing the unit in the red.
Chemicals: Chemical sales may be in the range of 3.3 to 3.6 million tons, while margins are likely to decrease considerably from the third quarter on narrowing base chemicals margin. Manufacturing plant availability is down between 74% and 78% (compared to 79% in the corresponding period of 2020). Overall, the segment is expected to report break-even earnings.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Shell is likely to beat estimates in the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Shell has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.40 per share each.
Zacks Rank: Shell currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
While an earnings beat looks uncertain for Shell, here are some firms from the energy space that you may want to consider on the basis of our model:
Liberty Oilfield Services Inc. (LBRT - Free Report) has an Earnings ESP of +2.55% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 8.
LBRT beat the Zacks Consensus Estimate for earnings in two of the last four quarters but missed twice, which resulted in a negative earnings surprise of 48.7%, on average. Liberty Oilfield Services has lost around 1.5% in a year.
EQT Corporation (EQT - Free Report) has an Earnings ESP of +1.00% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 9.
EQT Corp. beat earnings estimates in each of the last four quarters — the earnings surprise being 129.5%, on average. The company has gained around 24.9% in a year.
PBF Energy Inc. (PBF - Free Report) has an Earnings ESP of +24.81% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 10.
PBF Energy has topped the Zacks Consensus Estimate by an average of 22.8% in the trailing four quarters, including a 148% beat in Q3. The company has rallied around 86.2% in a year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.