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Shell on the Street: Analyst Ratings after the 2Q17 Earnings



Analyst ratings for Shell

In this series, we’ve examined the Royal Dutch Shell’s (RDS.A) 2Q17 earnings compared with the analysts’ estimates. We’ve also analyzed Shell’s segmental earnings in 2Q17 and discussed its stock performance after its earnings release on July 27, 2017.

After its 2Q17 earnings, Shell has been rated by a total of 11 analysts. Of that total, ten (91%) analysts have assigned “buy” or “strong buy” ratings, while one (9%) has assigned a “hold” rating. No one has assigned “sell” or “strong sell” ratings on the stock.

Shell’s mean target price of $62 per share implies a 12% gain from the current level.

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Why more “buy” ratings?

Shell plans to build an earnings model that can generate value even at weaker oil price levels. For this, Shell plans to use its four levers: decreasing operating costs, cutting capital spending, selling non-core assets, and delivering projects on time and within budget.

Shell also plans to focus on growing its priorities—deep-water and chemicals.

Meanwhile, the acquisition of the BG Group has started creating synergies and benefits for the combined entity. Jessica Ulh, Shell’s CFO (chief financial officer), stated: “As we have said, the acquisition of BG Group has worked well for us on many levels. It has given us growth in deep water and integrated gas. And it has also been a catalyst to reduce costs across the business to make Shell a more competitive and resilient company and we are making good progress here.”

Analyst ratings for peers

By comparison, integrated energy companies BP (BP), ExxonMobil (XOM), and Chevron (CVX) have been rated as a “buy” by 37%, 31%, and 65% of their analysts, respectively. Global players Statoil (STO), Petrobras (PBR), and YPF (YPF) have been rated as “buy” by 40%, 47%, and 77% of their analysts, respectively.

In the next and final part of this series, we’ll look at Shell’s implied volatility.


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