Shell Q4 Earnings Preview: Stock Faces Bearish Signals Ahead Of Results

As Shell PLC (SHEL) prepares to report its fourth-quarter earnings on Thursday, investors are bracing for a challenging period due to weak oil prices and low refining margins. The company's stock has been trading in a bearish trend, with its share price of $64.68 below key moving averages, indicating ongoing selling pressure. The eight-day simple moving average of $65.74 and the 20-day SMA of $65.10 both suggest a bearish signal, while the 50-day SMA of $64.32 offers a slight technical bullish signal. However, the stock's price is still below the 200-day SMA of $68.84, which suggests a bearish outlook in the longer term. The Moving Average Convergence Divergence (MACD) indicator at 0.4 indicates some positive momentum, while the Relative Strength Index (RSI) at 48.59 shows that the stock is nearing oversold territory but has not yet reached it. Investors should be cautious, as the stock could see more downside in the near term, though any recovery above key moving averages could trigger a shift toward a bullish trend.



Analysts expect Shell to post adjusted earnings of $4.10 billion for the fourth quarter, down from $7.31 billion in the same period last year. The anticipated decline in earnings can be attributed to several factors, including weak oil prices and low refining margins, which are expected to result in a 3% decline in fourth-quarter earnings across the sector compared to the prior quarter, according to Jefferies analysts. Additionally, Shell warned in its fourth-quarter performance update that it anticipates significantly lower earnings from its key integrated gas division. Analysts expect $2.19 billion in earnings from the division in Q4 2024, down from $3.97 billion in the same period last year.



Shell's integrated gas production for Q4 2024 is expected to range between 880,000 to 920,000 barrels of oil equivalent per day (BOE/D). Upstream production is anticipated to be between 1.79 million to 1.89 million BOE/D. Expected operating expenses for Integrated Gas are projected to be $1.0 billion to $1.2 billion, while Upstream operating expenses are expected to range from $2.2 billion to $2.8 billion. Chemicals & Products operating expenses forecasted to be between $2.0 billion to $2.4 billion. Integrated Gas Trading & Optimisation results are anticipated to fall significantly compared to Q3 2024 due to the non-cash impact of expiring hedging contracts. The performance in Chemicals and Products Trading & Optimisation is expected to decline significantly due to seasonal factors.



Despite the anticipated decline in earnings, Shell is still expected to post adjusted earnings of $24.11 billion for the full year, compared to $28.25 billion in 2023. The company's cash flow from operating activities is also expected to remain strong, with $52.65 billion for the full year and $10.77 billion for the fourth quarter, despite being below the prior year's levels. Shell is expected to maintain its $3.5 billion share buyback scheme and increase its quarterly dividend by 5% from the $0.344 a share announced in the third quarter, according to analysts at JPMorgan and UBS. However, investors should monitor the company's financial performance and market outlook to ensure that these policies remain aligned with the company's overall strategy and financial health.

In conclusion, Shell's Q4 earnings expectations indicate a challenging period for the company, with weak oil prices and low refining margins contributing to a potential decline in earnings. The company's stock has been trading in a bearish trend, and investors should be cautious as the stock could see more downside in the near term. However, any recovery above key moving averages could trigger a shift toward a bullish trend. Shell's commitment to returning capital to shareholders through its share buyback program and dividend policy suggests that the company is confident in its ability to maintain a strong financial position and generate sufficient cash flow to support these initiatives. Investors should continue to monitor the company's financial performance and market outlook to ensure that these policies remain aligned with the company's overall strategy and financial health.