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Shell (RDS.A) Gears Up for Q1 Earnings: What's in Store?

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Royal Dutch Shell PLC (RDS.A - Free Report) is set to report first-quarter 2021 results on Thursday Apr 29, before the opening bell.

The current Zacks Consensus Estimate is pegged at earnings of 79 cents for the to-be-reported quarter.

Against this backdrop, let’s delve into the factors that might have impacted the company’s March-quarter performance.

Key Q1 Predictions

The Texas winter storm disrupted the company’s operations and is estimated to bear a negative impact of up to $200 million on its adjusted earnings.

Upstream

The upstream production is projected between 2,400 and 2,475 thousand barrels of oil equivalent per day (boe/d) due to the Texas winter storm. However, the year-ago production was 2,710 thousand boe/d. Shell had earlier predicted its first-quarter 2021 upstream volumes to be 2,400-2,600 thousand boe/d. Taking into account the improvement in currently-realized liquid prices, Shell expects to recognize positive adjusted earnings from this segment. 

Oil Products

Shell estimates first-quarter oil product sales in the band of 3,700-4,700 thousand barrels per day. Although this range indicates an 11% decrease from the year-earlier reported number, the upper end of the estimate is assumed to be met. This Netherlands-based company anticipates its refinery availability between 71% and 75%.

Chemicals

The company’s chemical sales volumes are predicted between 3,500 and 3,700 thousand tons with the plant utilization of 77-81% of the producing volumes. Further, Shell expects chemicals base and intermediate margins to grow from the sequential quarter’s levels.

Integrated Gas

The company expects first-quarter LNG liquefaction volumes to contract to 7.8-8.4 million tonnes from its previous year’s quarterly output of 8.88 million tonnes. Moreover, its segmental production is forecast in the 920-960 thousand boe/d range. In the year-earlier period, Shell produced 955 thousand boe/d.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Shell this time around. 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 as elaborated below.

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

Earnings ESP: Shell has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 79 cents per share each.

Zacks Rank: Shell currently sports a Zacks Rank of 1, which increases the predictive power of ESP. However, the company’s 0.00% ESP in the combination makes surprise prediction difficult for the stock this earnings season. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q4 Earnings & Surprise History

Europe’s largest oil company Shell reported fourth-quarter earnings per ADS (on a current cost of supplies basis excluding items, signifying the market’s preferred measure) of 10 cents. The bottom line came in below the Zacks Consensus Estimate of 17 cents and also plunged from the year-ago profit of 74 cents per ADS.

This underperformance mainly stemmed from the coronavirus-induced commodity price collapse together with lower production and weak refining margins.

The Hague-based Shell reported revenues of $45 billion, which declined 47% from fourth-quarter 2019 sales of $85.1 billion.

As far as its earnings surprises are concerned, the company’s bottom line trumped the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in the remaining period, the average surprise being 163.88%. This is depicted in the graph below:

Royal Dutch Shell PLC Price and EPS Surprise

Royal Dutch Shell PLC Price and EPS Surprise

Royal Dutch Shell PLC price-eps-surprise | Royal Dutch Shell PLC Quote

Stocks to Consider

While earnings outperformance looks uncertain for Shell, here are some firms worth considering from the energy space on the basis of our model, which shows that these have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

BP plc (BP - Free Report) has an Earnings ESP of +5.10% and is Zacks #3 Ranked, presently. The firm is scheduled to release earnings on Apr 27.

Cabot Oil & Gas Corporation has an Earnings ESP of +2.31% and a Zacks Rank #3, currently. The firm is scheduled to release earnings on Apr 29.

Chevron (CVX - Free Report) has an Earnings ESP of +6.08% and is Zacks #1 Ranked, presently. The firm is scheduled to release earnings on Apr 30.

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