Royal Dutch Shell plc (AMS:RDSA) shares fell 8.3% to €23.75 in the week since its latest full-year results. Revenues of US$345b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$1.95, missing estimates by 9.3%. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Royal Dutch Shell’s 21 analysts currently expect revenues in 2020 to be US$346.0b, approximately in line with the last 12 months. Statutory earnings per share are expected to leap 53% to US$3.01. Yet prior to the latest earnings, analysts had been forecasting revenues of US$361.5b and earnings per share (EPS) of US$3.01 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The consensus has reconfirmed its price target of US$35.28, showing that analysts don’t expect weaker sales expectations next year to have a material impact on Royal Dutch Shell’s market value. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic Royal Dutch Shell analyst has a price target of US$42.90 per share, while the most pessimistic values it at US$29.70. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It’s pretty clear that analysts expect Royal Dutch Shell’s revenue growth will slow down substantially, with revenues next year expected to grow 0.3%, compared to a historical growth rate of 3.7% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 2.7% next year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Royal Dutch Shell.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Still, earnings are more important to the long-term value of the business. The consensus price target held steady at US$35.28, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Royal Dutch Shell going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Royal Dutch Shell’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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