Has Shell Stock Outperformed SPY in 4Q17 So Far?



Series recap

We started this series by reviewing Royal Dutch Shell’s (RDS.A) cancellation of its scrip dividend program. We also reviewed Shell’s estimate of its 1Q18 dividend payment. We looked at Shell’s cash flow position, which is a possible driver for the withdrawal of its scrip dividend.

We also saw why the majority of the analysts tracking Shell stock rated the company as a “buy,” followed by Shell’s improving debt position. In this part, we will look at Shell’s market performance, beginning with the review of its stock price returns.

Article continues below advertisement

Shell’s stock performance compared to SPY

Shell (RDS.A) stock has risen 5.7% since October 2, 2017, outperforming the broader market indicator, the SPDR S&P 500 ETF (SPY). The ETF has risen 4.3% in the same period.

Shell’s peers Chevron (CVX), ExxonMobil (XOM), and BP (BP) have risen 2.5%, 1.5%, and 3.5%, respectively, in the quarter so far.

WTI rises in 4Q17

In 2017, year-to-date, WTI prices have risen 10.1%. However, crude oil prices rose 13.9% in 4Q17 quarter-to-date.

WTI prices have been rising since September and are currently trading at a 30-month high. The increase in oil prices occurred on the back of reducing global supplies, which is primarily due to the production cuts implemented by the major oil-producing nations.

The cuts have been in effect for more than nine months. During the OPEC meeting conducted on November 30, 2017, it was decided to extend the cuts to December 2018. For more on oil prices, please read Why Crude Oil Futures and the S&P 500 Diverged Last Week.

Shell stock rises

The rise in oil prices in 4Q17 has supported Shell stock, and Shell posted strong 3Q17 earnings. Shell’s adjusted EPS (or earnings per ADS) stood at $0.99 compared to its estimated EPS of $0.84, beating the analysts’ estimates.

Shell’s 3Q17 EPS stood 46% higher than its 3Q16 adjusted EPS. For more on this topic, please refer to Shell Posted Strong 3Q17 Earnings, Stock Rose.

Shell has been successfully pulling its levers of capex, divestment, cost, and projects to improve its financial position. This trend is visible in its cash flow surplus and declining debt levels. The company’s cancellation of its scrip dividend and the announcement of buybacks have further supported the stock.

Overall, better oil prices, strong 3Q17 numbers, improving financials, and its focus on increasing shareholder distributions are the primary reasons for the rise in Shell stock in 4Q17.

In the next part, we’ll see what Shell’s moving averages suggest.


More From Market Realist