Royal Dutch Shell Plc Set For 31% Growth!

Forecasts say Royal Dutch Shell Plc (LON: RDSB) earnings should soar.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Earnings per share at Royal Dutch Shell (LSE: RDSB) (LSE: RDSA) fell by 39% to $2.66 per share in 2013, after the whole of the oil industry suffered from a falling oil price and from increasing upstream exploration costs. Shell has also faced some specific difficulties of its own, in various parts of the world.

But for once, shareholders seem to have a longer-term outlook in mind, and Shell shares have pretty much kept track with the FTSE 100 over three and five years — and over the pat 12 months, we’ve seen a 12% rise to today’s 2,400p level, beating the FTSE’s 5%.

Strategy

To deal with its problems, Shell has been selling off some non-core assets and focusing on higher-margin and more sustainable operations.

royal dutch shellHow long will that take to feed through to a return to earnings growth? Well, if you ask a City analyst right now, they’ll probably say almost immediately — the current consensus suggests a 31% rise in earnings per share to $3.50 by December 2014, with a more modest 5% rise penciled in for 2015.

That’s still some way off the $4.61 per share the company reported for 2011, and it does still mark a deterioration in the outlook for Shell over the past 12 months, but it should hopefully show that we’re past the bottom.

In fact, a year ago, long before the tough 2013 outcome was known, the City’s professional soothsayers were talking of around $4.65 per share for 2014 — and even just three months ago, we had a consensus of $4.

Low valuation

Today’s forecasts put Shell shares on a forward price to earnings (P/E) ratio of 11.5, which is pretty low compared to the current FTSE 100 forward multiple of 16, and with that forecast 5% growth for 2015 dropping it even lower to 11, are the shares cheap?

Perhaps surprisingly, out of a sample of 41 analysts, only 15 are recommending we buy Shell shares, although only four have a sell recommendation out — the remaining 22 are staying neutral.

Why the lack of enthusiasm? That falling forecast trend over the past 12 months, coupled with cautious recommendations, does suggest we might see further downgrades over the next year.

Surely a bargain?

But I reckon Shell is a great long-term buy right now, especially with dividend yields of around 5% forecast for the next two years — and maybe first-quarter results due on 30 April will convince a few more City professionals to agree with me!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan does not own any shares in Shell.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »