Shell’s Earnings Fell to a Two-Year Low, Missed Estimate

Royal Dutch Shell’s (RDS.A) reported earnings fell almost 50% YoY (year-over-year) to $3.0 billion in the second quarter. On an adjusted basis, Shell’s earnings fell 26% YoY to $3.5 billion—the lowest level since the first quarter of 2017. Shell’s earnings fell across its business segments in the second quarter.

Shell stock has fallen almost 5% in the pre-market hours.

Shell’s Earnings Fell to a Two-Year Low, Missed Estimate

Shell released its second-quarter results on Thursday. Shell’s earnings per ADS, on an adjusted basis, were $0.84. The company’s earnings missed analysts’ estimate of $1.23. In a few previous quarters, the company beat the earnings estimate. However, Shell’s revenues at $90.5 billion beat analysts’ estimate of $84.1 billion in the second quarter.

Why Shell’s earnings fell

Shell’s integrated gas earnings fell 25% YoY due to lower natural gas, liquefied natural gas, and liquids realizations. The segment’s hydrocarbon production fell 3% YoY due to divestments and the transfer of Salym assets to the upstream segment.

Shell’s upstream earnings fell 8% YoY due to lower realization. Higher volumes partly offset the fall. Shell’s upstream production rose 7% YoY due to higher production from North American assets and asset transfer. However, declines and divestments impacted the segment’s output.

The company’s downstream earnings fell 19% YoY due to a loss in the refining and trading segment and a 76% YoY decline in chemical earnings. While lower refining margins in the US Gulf Coast and Europe impacted the refining earnings, weaker chemical margins and volumes hit the chemical earnings. However, Shell’s marketing earnings rose 24% YoY in the second quarter due to higher retail margins.

Shell declared dividend and next buyback tranche

In the second quarter, Shell will pay a dividend of $0.94 per ADS on September 23. Shell’s dividend payment stayed flat YoY in the second quarter.

Shell announced the next tranche of its share buyback program. The company will likely buy a maximum of $2.75 billion worth of shares until October 28. In previous tranches, Shell bought back $9.25 billion shares between July 26, 2018, and July 29, 2019. Shell plans to buy back $25 billion shares until the end of 2020.

Peers’ performance

Suncor Energy’s adjusted EPS rose 10% YoY in the second quarter. BP’s (BP) earnings fell 1% YoY—lower than analysts’ estimated fall of 7% YoY. Read BP Stock: Jefferies Upgrades It to ‘Buy’ to learn more. Total SA’s earnings fell 20% YoY in the second quarter.

Analysts expect Petrobras and ExxonMobil’s EPS to fall 11% and 25% YoY, respectively, in the second quarter. However, they expect Chevron’s (CVX) EPS to rise 2% YoY in the second quarter. Read Will Chevron Outperform ExxonMobil in Q2? to learn more.