Shell reported full year and fourth quarter earnings results on Thursday that highlighted the devastating impact of the coronavirus pandemic on the energy industry.
Profits for the year fell 71% to $4.8 billion in 2020, while Q4 adjusted earnings fell 87% year-on year to $393 million compared to analysts’ estimates of $597 million.
Income attributable to shareholders of Royal Dutch Shell plc (RDS.A) amounted to a loss of $4 billion for the fourth quarter of 2020, which represents a 516% drop compared to the same period a year earlier.
Fourth quarter Cash Flow from Operations fell 39% year-on-year to $6.2 billion and 19% for the year to $34.1 billion.
Royal Dutch Shell CEO, Ben van Beurden, was optimistic despite the harsh results saying, “2020 was an extraordinary year. We have taken tough but decisive actions and demonstrated highly resilient operational delivery while caring for our people, customers and communities. We are coming out of 2020 with a stronger balance sheet, ready to accelerate our strategy and make the future of energy. We are committed to our progressive dividend policy and expect to grow our US dollar dividend per share by around 4% as of the first quarter 2021.”
Shell declared a first quarter 2021 dividend of $0.1735 after paying dividends to the value of $1.3 billion in Q4 2020.
Scotiabank analyst Paul Cheng downgraded Shell to a Sell three weeks ago and lowered his price target to $42 from $45. This implies upside potential of around 17% from current levels.
Cheng believes that Shell’s valuation compared to peers is “no longer as attractive” and feels that the outperformance of its share price could “trigger some mean reversion.”
Other analysts on the Street are more positive on the stock with a Moderate Buy consensus rating based on 6 Buys, 1 Hold and 1 Sell. The average analyst price target of $47.39 suggests upside potential of around 32% over the next 12 months.