How Will Shell Perform in 1Q16? Analysts Expect Weak Numbers



4Q15 estimated and actual performance

Royal Dutch Shell (RDS.A) is set to release its 1Q16 results on May 4, 2016. Before we look at 1Q16 estimates, let’s recap Shell’s 4Q15 performance compared to the estimates.

In 4Q15, Shell’s revenues surpassed Wall Street analysts’ estimates by 17%. That quarter, Shell reported EPS (earnings per share) of $0.29. However, on an adjusted CCS EII (current cost of supplies excluding identified items) basis, EPS stood at $0.58 compared to estimated EPS of $0.56, beating analysts’ estimates.

On a CCS EII basis, Shell posted an adjusted profit of $1.8 billion in 4Q15, a decline of 44% over 4Q14. This was due to the upstream segment that saw a 72% decline in earnings over 4Q14, to $493 million in 4Q15. Shell’s downstream segment’s CCS EII saw earnings remain stable in 4Q15 over 4Q14.

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Shell’s 1Q16 estimates

In 1Q16, according to Wall Street analyst estimates, Shell is expected to post EPS of $0.33. This is 68% lower than 1Q15 adjusted EPS and 42% lower than 4Q15 adjusted EPS. Shell’s revenues are estimated to be around $52 billion in 1Q16, 20% lower than 1Q15 revenues.

Shell’s upstream as well as downstream segments are likely to be under pressure in 1Q16 compared to 1Q15. The upstream segment is likely to bear the brunt of sinking oil prices. On the other hand, the refining cracks have narrowed in 1Q16 compared to 1Q15, which is likely to impact the downstream segment earnings.

Shell’s (RDS.A) peers Petrobras (PBR), Statoil (STO), and Cenovus Energy (CVE) are also expected to post subdued numbers in 1Q16 compared to 1Q15. The PowerShares Dynamic Large Cap Value ETF (PWV) has ~11% exposure to energy sector stocks.


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