Earnings Season: Shell’s Record Profits for 2022 to Drive Stock Prices Up in 2023?

While most companies struggled with their stock market performance in 2022, oil and energy stocks significantly outperformed the wider market, as their prices steadily increased, leading to all-time-high profits as reported by many oil giants, including London-based multinational oil and gas company, Shell. 

With Earnings Season approaching, FOREX.com’s seasoned analysts released detailed 2022 result forecasts and 2023 projections for Shell, which have proven largely accurate following the company’s release of its fourth quarter and full-year earnings reports on February 2nd, 2023.

“In a detailed piece about Shell’s Earnings, we had forecasted that quarterly adjusted earnings were to surge 41% to $9.0 billion”, says Joshua Warner Senior Analyst at FOREX.com by StoneX Group Inc., before adding “This forecast turned fact when Shell reported adjusted earnings of $9.8 billion in their final quarter of 2022.” 

“We had also predicted that adjusted earnings are set to double to $38.7 billion and Shell reported $39.9 billion of adjusted earnings for the full-year 2022. Moreover, we had anticipated a 48% rise in Shell’s annual revenue to $386.6 billion, and the company revealed that their revenues reached $381.3 billion”, states Warner, before concluding: “This level of accuracy in predicting financial results speaks volumes of FOREX.com analysts’ ability to leverage their experience, expertise and resources to deliver solid projections that traders may build on when thinking about trading earnings’ season.”

Shell’s Q4 and 2022 results highlight the strength of the company’s portfolio, despite a rapidly and constantly changing world. Cash flow from operations in the fourth quarter ending September 30, 2022 exceeded all expectations, reaching $46.009 billion, while annual profits reached highest-ever records of $40 billion.

However, and despite this stellar performance, Shell has announced a “disciplined” strategy in delivering shareholder returns, with a 15% dividend per share increase for the fourth quarter and a $4 billion share buyback programme, to be completed by its first-quarter 2023 results. 

According to FOREX.com, this was anticipated. Although oil majors are flush with cash, they have valid reasons to be more cautious about investors’ returns in 2023. The industry is facing increased political pressure and being blamed for not doing enough to help lower prices and fight the cost-of-living crisis, leading to windfall taxes and criticism over how much shareholders are being sprayed with cash. Shell has already said it expects to pay around $2.4 billion in windfall taxes in the UK and the EU in 2022, equal to around 6% of forecasted earnings.

Furthermore, while revenue and profits will remain high compared to historic levels in 2023, they are forecast to struggle as they come up against the record comparatives from last year. Ultimately, it will be much more difficult to deliver sales and earnings growth. Analysts currently believe Shell will see revenue drop 4% in 2023 and that adjusted earnings will fall over 15%. 

Yet, these reservations are not expected to curb shareholders’ interest in the sector which seems to offer attractive returns and boast more favourable prospects than most other stocks.

In terms of stock prices, Shell shares have found it more difficult to climb after losing some steam since hitting three-year highs at the start of November, but the stock is continuing to follow a supportive uptrend that can be traced all the way back to July 2021. This supportive line has been largely tracking the 200-day moving average for years, suggesting we could see the price fall toward 2,274p if it comes under any renewed pressure. Any move below this critical floor opens the door to a fall below 2,240p. On the upside, the stock needs to break above 2,446p to reclaim the peak we saw in both June 2022 and more recently this January. 

Read more details about Shell Q4 earnings and 2023 projections on www.Forex.com.

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