Shell stock rises on stronger refining margins, LNG pricing

Shell is anticipated to report improved earnings for the third quarter, with higher refining margins and stronger liquefied natural gas (LNG) pricing playing a key role. Analyst Jefferies projects adjusted earnings of $10.24 billion, a 4% increase from the previous quarter and 7% above the consensus estimate of $9.60 billion. Mizuho Securities forecasts an even higher adjusted earnings per share of $3.55, surpassing the consensus estimate of $3.16.

Additionally, Shell's earnings before interest, taxes, depreciation, amortisation and exploration expenses are expected to reach $21.83 billion, 5% higher than anticipated. The company's refining margin is projected to improve significantly to $42 per barrel, up from $24 per barrel in the second quarter. Refinery utilisation is expected to remain robust between 93% and 97%.

The acquisition of ARC Resources, completed on September 2, is anticipated to further boost upstream net operating income, although the chemicals segment may return to a loss due to deteriorating margins. Despite weaker oil prices, Shell maintains a Buy rating with a price target of 4,500 pence from Jefferies and a Neutral rating with an upgraded target of $103 from Mizuho, citing an optimistic outlook for refining margins.

The stock is currently trading at $105.19, with an attractive P/E ratio of 11.73 and a low PEG ratio of 0.11, indicating potential for growth. Shell is set to announce its third-quarter results today, and the company has recently strengthened its position through strategic acquisitions and partnerships, including the acquisition of ARC Resources and a deal with BP to acquire exploration assets in Brazil and the Gulf of America.