Shell plc Just Recorded A 34% EPS Beat: Here's What Analysts Are Forecasting Next

Shell plc (LON:SHEL) just released its latest full-year results and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$262b, some 2.4% above estimates, and statutory earnings per share (EPS) coming in at US$2.57, 34% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Shell

After the latest results, the 22 analysts covering Shell are now predicting revenues of US$338.0b in 2022. If met, this would reflect a major 29% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to leap 42% to US$3.76. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$308.7b and earnings per share (EPS) of US$3.49 in 2022. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£24.48, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Shell analyst has a price target of UK£31.28 per share, while the most pessimistic values it at UK£19.79. 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 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. One thing stands out from these estimates, which is that Shell is forecast to grow faster in the future than it has in the past, with revenues expected to display 29% annualised growth until the end of 2022. If achieved, this would be a much better result than the 5.7% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 2.3% per year. Not only are Shell's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Shell following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Shell going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Shell (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.

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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.