By Shell is set to release its financial results for 2023 on Thursday. Here’s the key information you should be aware of:
Cash Flow from Operating Activities
According to a consensus of 12 analysts’ forecasts compiled by Vara Research, Shell is projected to report $52.96 billion in cash flow from operating activities (CFFO) for 2023. This represents a decrease from the $68.41 billion recorded in 2022.
For the fourth quarter, analysts expect Shell to report $11.59 billion in CFFO based on a consensus of 22 forecasts. This figure is lower than the $12.33 billion reported in the previous quarter.
Adjusted Earnings
Analysts compiled by Vara anticipate Shell’s full-year adjusted earnings to be $26.82 billion, compared to $39.87 billion in 2022.
For the quarter, Shell is expected to record $6.04 billion in adjusted earnings, down from $6.22 billion in the preceding quarter. This prediction is based on a consensus of 24 forecasts.
Share Performance
During the fourth quarter, Shell’s share price experienced a 1.3% decrease, performing less favorably than the FTSE 100 index. However, it fared better than most European and U.S. counterparts. Currently, Shell shares are trading at 2,473.50 pence.
What to Look out For
Stay tuned for Shell’s upcoming financial results as they are unveiled on Thursday. These results will provide critical insights into the company’s performance during the year.
Bellwether: Shell’s Full-Year Results Impact
Market analysts are eagerly awaiting Shell’s full-year results, as the company is the first among other Big Oil firms to report its financial performance. The focus will primarily be on how weaker oil prices and refining margins have affected the company during the quarter. According to Barclays analysts, these factors are projected to drive an 8% decline in earnings across the European energy sector as a whole. Bank of America analysts concur with a similar forecast, stating that lower refining margins have directly led to a quarter-on-quarter decrease in net income.
Shell’s gas trading is also anticipated to garner close attention, as the company had previously announced their expectation of a substantial increase in this area for the period. RBC Capital Markets expressed particular interest in gas trading, noting that while oil trading results are likely to be lackluster across the board, significant differences could be observed in the gas trading segment.
Shell to Maintain Buyback Program Despite Drop in Cash Flow
Shell, one of the leading companies in the sector, has announced its intention to distribute 30%-40% of its cash flow from operations (CFFO) to shareholders, making it one of the most generous payout ranges in the industry. However, due to an anticipated decrease in CFFO during the fourth quarter, there have been concerns that Shell might reduce its current buyback rate.
Contrary to these beliefs, RBC analysts do not share this view and actually predict that Shell will establish a “minimum” buyback guide for 2024, ensuring investor confidence. The analysts suggest that the company will set a floor of $10 billion for buybacks. Similarly, Bank of America analysts expect Shell to maintain its current buyback run-rate throughout the fourth quarter. They highlight that Shell’s projected CFFO should be more than adequate to cover capital expenditure, dividend payments, and buybacks.
While the potential decrease in CFFO has raised questions regarding Shell’s buyback program, analysts remain optimistic that the company will continue rewarding shareholders accordingly.
Christian Moess Laursen contributed to this report.
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