Argus Reiterates Buy On Royal Dutch Shell Shares

Over the past few years, Royal Dutch Shell plc (ADR) (NYSE: RDS-A) has widely outperformed the S&P 500 Index and the energy sector. Over the past four years, shares of Shell have lost more than 22.7 percent of their value, while the S&P surged almost 62 percent. However, analysts at Argus envision this trend reversing as the oil and gas company trims its costs, divests non-core assets, increase its return on capital, and “maintains adequate liquidity,” Bill Selesky assured in a report.

The efforts mentioned above will probably lead to significantly larger profitability as oil prices continue to rebound off their lows, the note added.

A Look At Recent Results

On May 4, Royal Dutch Shell posted adjusted 1Q16 earnings of $1.553 billion or $0.44 per ADS, on a current cost-of-supplies basis. These EPS, in line with Argus’ expectations, beat the Street’s consensus by roughly $0.13. However, operating profit tumbled substantially in relation to last year, mostly on the back of depressed commodity prices and soft refinery results.

Having said this, the analysts reiterated an Outperform rating on the stock, issuing a $60 price target and an earnings estimate of $2.41 per ADS for 2016 - above the Street’s consensus of $2.21, and a 2017 estimate of $3.90, also higher that consensus at $3.81.