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Here’s Why Shell Stock Inched up in Thursday’s Pre-Market Trade

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Shell seems to have impressed the market with upbeat results for the second quarter of 2022. Its share buyback plan for the third quarter must have supported investors’ confidence.

Shell plc (NYSE: SHEL) has impressed its investors with better-than-expected results for the second quarter of 2022. Its earnings beat in the quarter was 6.3% and sales surprise stood at 21.6%. The company’s share repurchase program for the third quarter helped strengthen the market sentiment.

At the time of writing, the American Depository Receipt (ADR) of this $188.9 billion oil and natural gas company rose 1.5% in the pre-market trading session on Thursday. It is worth noting the SHEL ADRs rose 2.7% to close at $51.42 on Wednesday.

Highlights of Shell’s Q2 Results

In the quarter, Shell’s earnings were $3.06 per ADR, above the consensus estimate of $2.88 per ADR. Also, the bottom line expanded 115.5% on a year-over-year basis.

Revenues totaled $100.06 billion, surpassing the consensus estimate of $82.3 million. Also, the top line grew 65.3% from the year-ago quarter on the back of healthy segmental businesses.

Revenues of the Integrated Gas segment grew 124% year-over-year in the second quarter, while revenues of the Marketing and Chemical & Products segments rose 69.2% and 37.8%, respectively. Also, sales of the Renewables & Energy Solutions segment increased 213.8% year-over-year in the quarter. However, the Upstream segment’s revenues slipped 1.2% from the year-ago quarter.

Total production was 944 thousand barrels of oil equivalent per day (kboe/d) in the Integrated Gas segment, up 5.4% sequentially. Also, production in the Upstream segment was 1,917 kboe/d in the second quarter, down 5.3% from the first quarter of 2022.

Total expenses in the quarter expanded 33.5% year-over-year to $76.9 billion. Adjusted earnings were $11.5 million, up 107.3% year-over-year.

Capital Allocation by Shell

In the second quarter of 2022, Shell generated a cash flow of $18.7 billion from operating activities, while its cash and cash equivalents stood at $39 billion at quarter-end. From its available resources, the company used $6.7 billion for capital expenditure and $2.5 billion to repay debts. Exiting the second quarter, long-term debts were $77.2 billion.

The company’s cash dividends to shareholders were $1.9 billion (dividend yield is 3.59%) and share buybacks were worth $5.5 billion. Shell anticipates completing its $6 billion share buyback program in the third quarter.

Shell’s Projections for Q3 and 2022

For 2022, the company expects capital expenditure to be within the $23-$27 billion range.

Total production is anticipated to be 890-940 kboe/d in the Integrated Gas segment and 1,750-1,950 kboe/d in the Upstream segment in the third quarter.

Wall Street Is Optimistic about Shell Stock

As per TipRanks, analysts are optimistic about the prospects of Shell and have a Strong Buy consensus rating based on three Buys and one Hold. SHEL’s average price forecast of $69.25 suggests 34.68% upside from the current level.

Bloggers Are Bullish on Shell

According to TipRanks, financial bloggers are 97% Bullish on SHEL stock, compared with the sector average of 69%.

Concluding Remarks for Shell’s Investors

Following the company’s second-quarter results, it is evident that its fundamentals are very strong, even amid an uncertain economic environment. The company’s efforts to build its resources and reward stakeholders through dividends and share buybacks could further help strengthen its investment appeal.  

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