In This Article:
Shell plc SHEL is set to release fourth-quarter results on Jan. 30. The current Zacks Consensus Estimate for the to-be-reported quarter is earnings of $1.78 per share on revenues of $80.1 billion.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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 SHEL’s previous-quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last reported quarter, Europe’s largest oil company beat the consensus mark, backed by strong production and higher LNG sales. SHEL had reported earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.92, well above the Zacks Consensus Estimate of $1.72. However, revenues of $72.5 billion came in 14.3% below the Zacks Consensus Estimate due to weaker commodity prices and a significant drop in the Chemicals and Products’ performance.
Shell beat the Zacks Consensus Estimate for earnings in each of the last four quarters, resulting in an earnings surprise of 15.4%, on average. This is depicted in the graph below:
Shell PLC Unsponsored ADR Price and EPS Surprise
Shell PLC Unsponsored ADR price-eps-surprise | Shell PLC Unsponsored ADR Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for the third-quarter bottom line has remained unchanged in the past seven days. The estimated figure indicates a 19.8% drop year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests essentially no change from the year-ago period.
Factors to Consider
Earlier this month, Shell released a preliminary report for the October-December period, which flagged significant hurdles across its integrated gas, renewables, and oil trading divisions, which are expected to impact overall performance.
Declining Gas Earnings and Production Guidance: Shell has warned of a sharp decline in earnings from its Integrated Gas division compared to the $2.87 billion reported in Q3 2024. This is primarily attributed to the expiry of hedging contracts that shielded the company from volatile market conditions during the Russia-Ukraine conflict. Additionally, natural gas production is projected to fall to 880,000-920,000 barrels of oil equivalent per day from 941,000 in the previous quarter, due to maintenance at Qatar’s Pearl GTL plant. Liquefied natural gas (LNG) volumes are also expected to decline to 6.8-7.2 million metric tons from 7.5 million, reflecting reduced feedgas deliveries and fewer cargoes.
Impairments and Cash Flow Challenges: Shell has announced plans to record a non-cash, post-tax impairment of $1.5 billion to $3 billion, with up to $1.2 billion stemming from its renewables division. This reflects the challenges faced by its offshore wind and energy solutions business, which struggled to achieve consistent profitability in 2024. Adding to the strain, the company anticipates a $1.3 billion hit to cash flow from operations due to emission-permit payments in Germany and the United States, a recurring Q4 expense.
Lower Trading and Seasonal Weakness: Shell’s trading operations in both the Integrated Gas and Oil Products divisions are expected to post significantly weaker results than in Q3. Seasonal declines in demand and the expiration of hedging contracts have weighed on performance, while chemicals margins have remained depressed. These factors contribute to what Shell itself describes as a "soft" quarter, a sentiment echoed by market analysts who anticipate earnings downgrades.