Earnings results are a great way for investors to judge a company. They’re used to determine whether companies are on track with their initial guidance. These results can often radically move share prices in either direction, depending on the numbers reported. So, here’s an earnings preview for three FTSE firms reporting results this week.

It’s always best to compare firms’ new quarterly/half-year numbers to those from prior years. But certain revenue figures may have been impacted by the pandemic, so it’s important to get context from pre-pandemic levels too. It can also be useful to consider whether a company can perform better than its previous year’s numbers, or if it can beat analysts’ annual forecasts. Analysts in the UK don’t always publish earnings previews for quarterly or half-year periods, but given their popularity, the shares covered below are exceptions.

Lloyds (H1 Earnings)

Lloyds (LSE: LLOY) is one of Britain’s biggest financial institutions. Its brands include Lloyds itself, Halifax, and Bank of Scotland. It earns the bulk of its revenue from mortgage loans. The FTSE 100 bank is expected to post its half-year earnings for its six months performance ending June on 27 July. The company’s financial year ends in December.

The overall consensus is that Lloyds is expected to continue growing its top line from rising interest rates. That being said, its diluted EPS is expected to decrease for the half year and full year. This is most probably due to the increasing number of defaults and bad loan provisions. Investors will also be keeping an eye out for the remediation figure, number of late-stage loans, and free cash flow to determine whether the UK is entering a recession.

Shell (Q2 Trading Update)

Shell (LSE: SHEL) is a British multinational oil and gas company. It is one of the biggest oil and gas firms. And by revenue and profits, it’s one of the largest companies in the world. The giant is set to reveal its Q2 numbers for its three months performance ending June on 28 July. The company’s financial year ends in December.

The earnings preview seems to indicate a top and bottom line improvement to Shell’s business, as last year’s figures were still impacted by worldwide lockdowns. As global travel resumes, investors will be keeping an eye out for future guidance to determine whether analysts estimates can be met for the full year. If so, the Shell share price is expected to stay green for the foreseeable future.

Unilever (H1 Earnings)

Unilever (LSE: ULVR) is a consumer goods conglomerate producing food, condiments, ice cream, cleaning agents, beauty products, and personal care. Its brands include Lynx, Ben & Jerry’s, Dove, and many more. Unilever will be releasing its half-year earnings for its six months performance ending June on 26 July. The company’s financial year ends in December.

While revenue is expected to increase on a half-year and full-year basis, underlying EPS is expected to fall. This is most probably due to high inflation rates that are beginning to take a toll on a global scale, with higher costs impacting the producer’s operation expenditure. Nonetheless, a beat on both revenue and EPS estimates this week could see the Unilever share price push into the green for the year.

The post Earnings preview: Lloyds, Shell, Unilever appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Recent trends in the Shell share price 

The main reason for the recent surge in the Shell share price is the rising price of oil. Indeed, at the start of June last year, WTI Crude was priced at under $70 a barrel, whereas it has now reached around $115 per barrel. This rise has been caused by declining supply due to the tragic Ukraine-Russian war, alongside increased demand as global pandemic restrictions have been lifted. 

These high oil prices have led to very strong profits. In fact, in the first quarter, the oil giant reported adjusted earnings of over $9bn, far higher than the $3.2bn reported in the first quarter of last year. 

This has also enabled the group to improve in other areas of the business. For example, net debt now totals around $49bn, over $20bn lower than last year. Shareholder returns have also increased, with the quarterly dividend now totalling 25 cents per share. Although this equates to a slightly lacklustre yield of 3.3% due to the high Shell share price, it’s extremely sustainable considering the current profits the group’s making. Shell has also announced a share buyback programme of $8.5bn, which should also help to boost the share price. 

My concerns

So far, there seems very little wrong with Shell. However, I do have three main concerns about the company. 

Firstly, there’s the recent windfall tax that the government has introduced, to help people deal with high energy prices. Although the impact on Shell isn’t fully known, it may restrict the company’s ability to return cash to shareholders.

Secondly, I don’t think that these high oil prices are sustainable for the long term, especially considering climate change issues. Therefore, Shell may be forced to rely on other parts of its business, such as the renewables sector. This is still in its infancy, however. 

Finally, I have ESG concerns about Shell, due to its role in contributing to global warming. For example, a safety consultant, Caroline Dennett, recently quit the company stating that it was “causing extreme harms”. This provides me with a strong reason to stay away from a company. 

What am I doing now? 

Right now, the Shell share price is soaring, and its recent rise has been understandable. But I’m less confident about its long-term future as I don’t believe that the current oil price is sustainable. Because of this, I don’t see a long-term upward trajectory for the share price. I’ll be observing Shell shares from the sidelines, but I won’t buy. 

The post The Shell share price has more than doubled! Has it got further to rise? appeared first on The Motley Fool UK.

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Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s been a volatile start to 2022 for global stock markets as geopolitical uncertainty and monetary tightening begin to bite. However, I’ve identified two FTSE 100 stocks that have bucked this trend.

With strong fundamentals and solid earnings forecasts, I believe these UK shares have the potential for substantial gains over the next five years and beyond. Here’s why.

FTSE 100 share #1 – Shell

Shell (LSE: SHEL) stock has enjoyed explosive gains of over 26% this year after superb financial results for 2021. Adjusted earnings beat expectations, rocketing to $19.29bn from $4.85bn the previous year.

Buoyed by sky-high oil prices, the FTSE 100 energy giant will undertake an $8.5bn share buyback programme by the end of Q2. Shell also intends to hike its dividend by 4% to $0.25 per share.

Yet despite its strong recent performance, the Shell share price is marginally down over five years. In addition, the plummeting values of its Russian assets have recently cost the company nearly $5bn since it ceased operations in the country.

Nonetheless, I remain bullish. Shell has sufficient geographic diversification to withstand Russian sanctions in my view. For instance, there’s its substantial on-stream oil and gas projects near Nigeria and Mexico.

Shell stock could also benefit from an agreement with Deutsche Telekom to supply renewable energy for 10,000 electric vehicle charging points in Germany. I regard this as a positive development for the fossil fuel business.

While there are signs of a greener future for the company, I still see oil as the real driver of growth for Shell’s share price. During a booming commodities cycle, the next five years should be significantly better for this FTSE 100 stock in my opinion. I’d buy.

FTSE 100 share #2 – London Stock Exchange Group

Financial infrastructure and data analytics form the core of London Stock Exchange Group (LSE: LSEG)’s business. The LSE share price is up 16% over three months and an impressive 73% over three years. This FTSE 100 company generates 44% of its earnings in EMEA, 42% in the Americas and 14% in Asia.

LSE services 40,000 customers in 190 countries. Last year, the company enjoyed revenue growth in all three of its primary divisions — data & analytics, capital markets and post trade. Adjusted earnings per share almost doubled to 287p.

It also delivered statutory total income of £6.4bn for 2021 and a 27% increase in the total dividend per share to 95p. This year, the company has ambitious plans to expand its Workspace technology to foreign exchange users at scale, reinforcing its end-to-end FX offering. Overall, the FTSE 100 stock looks well positioned for long-term growth.

However, cautious investors will note recent news concerning heavy selling of LSE shares. Institutional investors sold a total of £450m last month, according to Bloomberg, suggesting the stock could be overvalued. As Brexit tensions persist, further headwinds are posed by EU plans to move its clearing operations away from the London Stock Exchange to the eurozone by 2024.

Nevertheless, I’m optimistic about this British financial company. While not without risks, it’s a highly cash-generative business with truly global diversification. For me, LSE stock is a good investment to buy and hold for years to come.

The post 2 soaring FTSE 100 shares I’d buy and hold until 2027 appeared first on The Motley Fool UK.

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• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• Up 36%, could Shell shares still offer value for the long term?
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Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shell

Despite reduced demand, Shell made over $200bn in revenue in the last 12 months. The Anglo-Dutch company recently announced a $2bn share buyback and made a commitment to invest further in the production of hydrogen fuel and carbon capture technology.

Personally, I’m a big believer in the future of hydrogen. But Shell is producing blue hydrogen, which is made by extracting the hydrogen from natural gas. This is a carbon-heavy process that needs expensive carbon capture facilities to make it viable.

The share buyback also worries me. It’s good for shareholders in the short term, but doesn’t bode well for the future. Prices will fall as the oil and gas shortage ends. Carbon taxes are also certainly going to be implemented at some point in the future. To me, Shell doesn’t seem to be taking the need to change its business seriously enough.

BP

Last year, BP announced a commitment to reduce its oil and gas production by 40%. It plans to do this by investing directly in wind and solar power. In the meantime, BP has also committed to producing more blue hydrogen and developing carbon capture technology. Blue hydrogen makes sense for BP. It has already has invested several billions of dollars into the infrastructure to find, extract, and refine natural gas from its wells around the world. But this shortfall still needs carbon capture technology to catch up if it’s going to be effective. BP has also benefited greatly from the oil and gas shortage, bringing in more than $7bn in the first half of 2021. Unfortunately, this seems to have gone to its head. It has also announced a stock buyback in the region of $1.4bn.

Conclusion

The oil and gas shortage will eventually subside and the COP26 climate summit is less than a month away. US Climate Envoy John Kerry believes that the world is ready to tackle climate change and we can expect some sweeping changes.

Both BP and Shell have managed to build investor confidence by promising to develop low-carbon technologies. But neither of them seems willing to utilise the cash brought in by the gas shortage to achieve this. I think this will harm both companies in the long term, and I won’t be adding either to my portfolio.

The post The oil and gas shortage boosts the Shell and BP share prices. But I won’t be buying appeared first on The Motley Fool UK.

More reading

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James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.