Shell Shares Hit New High After $10.8 Billion Earnings Report

Shell reported nearly doubling its adjusted profit in Q3: $10.8 billion compared to $5.4 billion a year earlier, writes CNBC. The LSEG consensus was $9.92 billion, meaning the profit exceeded expectations. The company increased its quarterly share buyback from $3 billion to $5 billion. On the Amsterdam exchange on October 29, shares rose more than 3% and hit a 52-week high; they gained 5.4% over the week and 16.7% over the month.

What's behind the profit

The profit increased amid rising raw material prices and a shortage of oil products due to the conflict in the Middle East. The indicative global refining margin reached a record $42 per barrel compared to $24 in the previous quarter, surpassing the previous record of Q2 2022 at $28.04. Operating cash flow amounted to $21.0 billion. Shell also announced the acquisition of ARC Resources, the final investment decision on the second phase of LNG Canada, and the sale of non-core assets in the US and Cyprus. The result was achieved despite the low water level in the Rhine, complicating the logistics of fuel and chemical products in Europe.

"Shell's constant focus on operational results allowed it to deliver very strong results in a quarter marked by ongoing significant disruptions in the global energy system," said company head Wael Sawan.

Estimates and risks

According to InvestingPro's fair value models, the stock is valued at 56.86 euros – about 16% above the current price; the range of 14 models is wide, from 41 to 91 euros. The average target of seven analysts is 45.89 euros, approximately 6.5% below the current price, with a range of 38–53 euros; two analysts have raised their earnings forecasts for the near term. Risks: the refining margin may normalize, and the profit spike heavily depends on it and LNG. Production increased quarter-on-quarter to 2.57 million barrels of oil equivalent per day but remained below 2.82 million a year earlier. According to WarrenAI, the daily RSI at around 75 indicates an increased risk of a pullback.