26 Apr

Shell’s 1Q17 Estimates: Could Its Earnings Rise?

WRITTEN BY Maitali Ramkumar

Estimated and actual performance for 4Q16

Royal Dutch Shell (RDS.A) is expected to release its 1Q17 results on May 4, 2017. Before we study the company’s 1Q17 estimates, let’s recap Shell’s 4Q16 performance compared to the estimates.

In 4Q16, Royal Dutch Shell’s (RDS.A) revenues missed Wall Street analyst estimates by 8%. During the quarter, Shell’s adjusted EPS stood at $0.58 compared to its estimated EPS of $0.66, missing the analysts’ estimates. The company’s 4Q16 earnings per share were 15% lower than its 3Q16 adjusted EPS.

Shell’s 1Q17 Estimates: Could Its Earnings Rise?

On a CCS (current cost of supplies) basis, Shell posted an adjusted profit of ~$1.8 billion in 4Q16, a rise of 14% over 4Q15. Its earnings rose as its Upstream segment became profitable in 4Q16 over 4Q15. However, Shell’s Integrated Gas and Downstream earnings fell in 4Q16 compared to 4Q15.

Shell’s 1Q17 estimates

According to Wall Street analyst estimates, Shell (RDS.A) is expected to post EPS of $0.84 in 1Q17. This EPS estimate is 46% higher than its 4Q16 adjusted EPS and almost double its 1Q16 adjusted EPS. Shell’s revenues are estimated to reach ~$72 billion in 1Q17, which is 48% higher than its 1Q16 revenues.

Shell’s Upstream earnings are likely to be higher due to increased oil prices in 1Q17 compared to 1Q16. Its earnings from its Downstream segment are likely to improve due to better refining cracks in 1Q17 over 1Q16. We’ll consider this factor in the next article.

Shell’s peers

Shell’s (RDS.A) peers Total SA (TOT) and ExxonMobil (XOM) are also expected to post 40% and 96% higher EPS in 1Q17, respectively, compared to 1Q16. Chevron (CVX) and Suncor Energy (SU) are expected to see a steep surge in their earnings in 1Q17 compared to their losses in 1Q16.

If you are scanning stocks for exposure to large US companies, you can consider the SPDR Dow Jones Industrial Average ETF (DIA). DIA also has ~6% of combined exposure to integrated energy majors XOM and CVX.

If you’re looking for exposure to core S&P 500 Index stocks, you can consider the SPDR S&P 500 ETF (SPY). This ETF has ~7% exposure to the energy sector stocks, including XOM and CVX.

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