Shell plc SHEL is set to release third-quarter results on Oct. 31. The current Zacks Consensus Estimate for the to-be-reported quarter is earnings of $1.72 per share on revenues of $84.6 billion.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Let’s delve into the factors that might have influenced the integrated energy behemoth’s results in the September quarter. But it’s worth taking a look at SHEL’s previous-quarter performance first.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, Europe’s largest oil company beat the consensus mark, backed by strong Marketing performance and lower costs. SHEL had reported earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.97, well above the Zacks Consensus Estimate of $1.82. However, revenues of $75.1 billion came in 15.3% below the Zacks Consensus Estimate due to lower liquefied natural gas (“LNG”) trading results.

Shell beat the Zacks Consensus Estimate for earnings in each of the last four quarters, resulting in an earnings surprise of 12.6%, on average. This is depicted in the graph below:

Trend in Estimate Revision

The Zacks Consensus Estimate for the third-quarter bottom line has remained unchanged in the past seven days. The estimated figure indicates a 7.5% drop year over year. The Zacks Consensus Estimate for revenues, however, suggests an 8.4% increase from the year-ago period.

Factors to Consider

Earlier this month, Shell released a preliminary report for the July-September period, which mentioned that its refining margins took a significant hit in the third quarter. The company’s profit margin in the Refining segment dropped 30% compared to the previous quarter. This was mainly due to a decline in the demand for refined products globally.

Now, let’s dig into some selected items from that release.

The drop in refining margins due to a slowdown in economic activities globally is anticipated to affect the third-quarter earnings of major energy firms worldwide. Further, refineries entering the market are increasing competition, resulting in an oversupplied market and laying downward pressure on prices. This is also expected to weigh on the third-quarter earnings of major energy players.

Shell is expected to announce its quarterly results on Oct. 31, 2024. Ahead of the earnings call, the company has provided an update, showing a substantial decline in its indicative refining margins from $7.7 per barrel (in the previous quarter) to $5.5. Furthermore, Shell mentioned that its trading results for the chemicals and oil products division would also be lower than the prior quarter. This indicates that Shell’s financial performance in these divisions might have been negatively impacted in the third quarter.

Shell is the largest trader of LNG globally, implying that the company trades LNG cargoes. SHEL raised its production guidance for the quarter from 6.8-7.4 million tons to 7.3-7.4. However, the company has mentioned that the trading results for the LNG segment will remain flat sequentially.

According to the latest update, Shell’s upstream production is expected to edge up on a sequential basis in the third quarter of 2024 at the midpoint of the guidance. The supermajor estimates its output in the range of 1,740-1,840 (thousand barrels of oil equivalent per day) MBOE/d compared to 1,783 MBOE/d in the second quarter of 2024.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Shell is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -6.12%.

Zacks Rank: SHEL currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

While an earnings beat looks uncertain for Shell, here are some firms from the energy space that you may want to consider on the basis of our model:

Cheniere Energy LNG has an Earnings ESP of +12.21% and a Zacks Rank #3. The firm is scheduled to release earnings on Oct. 31.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheniere Energy beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed on the other two. It has a trailing four-quarter earnings surprise of roughly 55.9%, on average. Valued at around $41.8 billion, LNG has gained 10.8% in a year.

Exxon Mobil Corporation XOM has an Earnings ESP of +0.02% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov. 1.

ExxonMobil beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 1.8%, on average. Valued at around $471.2 billion, XOM is up 12.8% in a year.

Sunoco LP SUN has an Earnings ESP of +13.44% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov. 6.

The 2024 Zacks Consensus Estimate for Sunoco indicates 154.3% year-over-year earnings per share growth. Valued at around $8 billion, SUN has increased 4.9% in a year.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

Sunoco LP (SUN) : Free Stock Analysis Report

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