Earnings Report: Shell plc Missed Revenue Estimates By 18%

Shell plc (LON:SHEL) came out with its first-quarter results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks to have been a bit of a mixed result. While revenues of US$72b fell 18% short of what the analysts had predicted, statutory earnings per share (EPS) of US$1.13 exceeded expectations by 3.9%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Shell

Taking into account the latest results, Shell's 18 analysts currently expect revenues in 2024 to be US$301.1b, approximately in line with the last 12 months. Per-share earnings are expected to leap 48% to US$4.16. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$325.8b and earnings per share (EPS) of US$4.08 in 2024. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The consensus has reconfirmed its price target of UK£31.53, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on Shell's market value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Shell analyst has a price target of UK£37.84 per share, while the most pessimistic values it at UK£28.86. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 0.5% by the end of 2024. This indicates a significant reduction from annual growth of 1.4% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 0.3% per year. So it's pretty clear that Shell's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Unfortunately they also cut their revenue estimates for next year. Forecasts imply the business' revenue is expected to perform worse than the wider industry. That said, earnings per share are more important for creating value for shareholders. Even so, long term profitability is more important for the value creation process. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Shell. Long-term earnings power is much more important than next year's profits. We have forecasts for Shell going out to 2026, and you can see them free on our platform here.

Even so, be aware that Shell is showing 2 warning signs in our investment analysis , you should know about...

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.