Piper Sandler has maintained its Overweight rating on Shell Plc (NYSE: LON:SHEL) with an unchanged price target of $82.00.
The firm's update comes ahead of the company's third-quarter earnings, taking into account current market commodity prices and the latest quarterly guidance provided by Shell.
The assessment by the firm reflects an expectation of few surprises, either positive or negative, in the upcoming earnings report.
The firm noted Shell's operational performance in upstream activities, highlighting that liquefied natural gas (LNG) liquefaction volumes reached 7.5 million tonnes (MT), surpassing the previous estimate of 7.1 MT.
Additionally, the firm pointed out that Shell's exploration and production (E&P) production remained flat sequentially, defying expectations of a decline. Despite these operational strengths, a negative revision to the third-quarter 2024 earnings estimate was necessary due to adverse movements in commodity prices and weaker-than-anticipated refining and chemicals results, which fell short by $25 million compared to the prior $784 million.
In other recent news, Shell reported a significant decrease in refining profit margins during the third quarter, coinciding with a period of economic slowdown and the introduction of new refineries.
Additionally, the company announced the final results of its exchange offers, a move aimed at streamlining its debt portfolio. Shell is also facing legal action initiated by the Russian Prosecutor General's Office, targeting multiple subsidiaries of the firm following its withdrawal from Russian operations.
Meanwhile, BP (NYSE:BP) saw its shares slightly increase after the company stepped back from its goal to reduce oil and gas production by 2030, a shift in strategy aimed at rebuilding investor trust. The company, along with other energy giants like Shell, Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), and TotalEnergies (EPA:TTEF), might need to borrow substantial amounts to maintain shareholder returns amid falling oil prices, according to analysts from RBC Capital Markets.
Erste Group has downgraded Shell from Buy to Hold, expecting increased oil supply from key producers to exert pressure on oil prices and impact Shell's sales performance.
InvestingPro Insights
To complement Piper Sandler's analysis, recent data from InvestingPro offers additional context on Shell's financial position and market performance. Shell's market capitalization stands at $216.49 billion, reflecting its significant presence in the Oil, Gas & Consumable Fuels industry. The company's P/E ratio of 12.23 suggests a relatively attractive valuation, aligning with Piper Sandler's view on Shell's appeal in the current market.
InvestingPro Tips highlight Shell's financial strength and shareholder-friendly policies. The company has maintained dividend payments for 20 consecutive years, demonstrating a commitment to returning value to shareholders. This is further supported by management's aggressive share buyback program, which contributes to a high shareholder yield. These factors may provide additional reassurance to investors beyond the operational metrics discussed in the earnings preview.
It's worth noting that Shell's revenue for the last twelve months as of Q2 2024 was $302.02 billion, with a gross profit margin of 25.58%. While these figures are substantial, investors should be aware that two analysts have revised their earnings downwards for the upcoming period, which could impact short-term expectations.
For readers interested in a more comprehensive analysis, InvestingPro offers 8 additional tips for Shell, providing a deeper dive into the company's financial health and market position.
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