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Analysts’ Favorite Integrated Energy Stocks: Here Are the Top 10

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Part 2
Analysts’ Favorite Integrated Energy Stocks: Here Are the Top 10 PART 2 OF 11

Analyst Ratings for Shell: No. 1 in the Top 10 Stocks

Analyst ratings for Shell

Let’s start our journey of analyzing the top ten integrated energy stocks with the company that has the most “buy” ratings: Royal Dutch Shell (RDS.A). Shell is a British-Dutch integrated energy company with upstream, downstream, and integrated gas business segments. The company also has the second-largest market cap (capitalization) of $236.0 billion among our top ten stocks.

Analyst Ratings for Shell: No. 1 in the Top 10 Stocks

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Shell is covered by 11 Wall Street analysts. The analyst rating chart above shows that ten (or 91.0%) of the analysts rated Shell a “buy” in September 2017. Only one analyst rated it a “hold.” YPF (YPF) and Suncor Energy (SU) have received 85.0% and 79.0% “buy” ratings, respectively. We’ll look at these stocks in the following parts of this series.

Shell’s implied gain

Shell’s mean price target has risen 4.0% over September 2016 to $63 per share in September 2017. Shell’s mean target price implies an 11.0% rise from the current level. The potential gains have diminished due to a steeper rise of 14.0% in Shell stock compared to a 4.0% rise in its mean target price in the stated period.

Shell stock also rose in the current quarter since July 3, 2017, by 7.0%. That could be due to a combination of the rise in oil prices in the quarter and Shell’s 2Q17 earnings surpassing analyst estimates. Along with providing returns in terms of price appreciation, Shell stock also provides a higher dividend yield. The company’s current dividend yield stands at 6.6% compared to 6.3% in 3Q15.

Valuations

Shell trades at a forward PE (price-to-earnings) multiple of 15.5x, which is below the average forward PE multiple of 22.8x for the ten integrated energy stocks in this series. Shell also trades at 5.9x for its forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, which is below the peer average of 6.3x. Shell acquired the BG Group in 2016, which resulted in a pile-up of debt at a time when oil prices were at their multiyear lows.

However, now oil prices have recovered, and benefits and synergies from the BG acquisition have started pouring in. After the recent earnings release, it was evident that Shell’s leverage and liquidity position has started to improve. For more on this, please refer to Is Shell’s Strategy Yielding Results?

In the next part, we’ll look at analyst ratings for YPF.

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