Royal Dutch Shell plc (RDS.A) is set to release fourth-quarter and full-year 2014 financial results on Jan 29.
The integrated energy major has beaten the Zacks Consensus Estimate in three of the trailing four quarters and has an average positive surprise of 8.04%. In the last reported quarter, Shell surpassed the Zacks Consensus Estimate by 10 cents on strong refining profitability, lower spending and contribution from certain high-margin projects. Let’s see how things are shaping up for this announcement.
Factors to Consider in the Past Quarter
Shell’s successful divestment program over the past year has helped it focus more on critical, higher-return projects. This has resulted in capital discipline and improved returns that may help fourth-quarter earnings.
However, Shell is expected to face headwinds in this currently weakened market as its upstream segment is likely to be hit by low commodity prices. As liquids contribute almost half of Shell’s total production, the crude price tumble over the past few months is expected to drag down results for the group.
On the other hand, Shell’s liquefied natural gas (LNG) business could also take a beating with LNG prices remaining low. Despite shutting high capex projects and selling poor-performing businesses, Shell’s capital spending – about $40 billion – continues to remain a concern.
Additionally, fourth-quarter estimates moving down over the past few weeks suggest further bearishness ahead.
Earnings Whispers
Our proven model does not conclusively show that Shell is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently -12.69%.
Zacks Rank: Shell has a Zacks Rank #5 (Strong Sell). We caution against Sell-rated stocks (#4 and 5) going into the earnings announcement.
Promising Stocks
Here are some firms from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Partners, LP (SEP) has an Earnings ESP of +2.94% and a Zacks Rank #1 (Strong Buy). The partnership is expected to release earnings on Feb 4.
Valero Energy Partners LP (VLP) has an Earnings ESP of +3.33% and a Zacks Rank #2 (Buy). The partnership is slated to release earnings on Feb 5.
Tesoro Corporation (TSO) has an Earnings ESP of +1.40% and a Zacks Rank #2. The company is likely to release earnings on Feb 11.
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