Shell is set to release its second-quarter 2026 earnings report on July 30. Here’s Morningstar’s take on what to look for in Shell’s earnings and the outlook for its stock.
Key Morningstar Metrics for Shell
- Fair Value Estimate: GBX 3,580.00
- Morningstar Rating: ★★★
- Economic Moat: None
- Morningstar Uncertainty Rating: High
Shell Earnings Release Date
- Thursday, July 30, before market open.
What to Watch for in Shell’s Q2 Earnings
- Buyback size: The clearest signal of management’s confidence in underlying cash generation, especially coming out of a technical pause.
- Pearl GTL restart timeline: Determines how much of the integrated gas shortfall persists into the third quarter versus proving a one-quarter air pocket.
- ARC Resources update: Any commentary on regulatory progress or a revised expected closing date within the second half of 2026.
- Durability of the trading result: Whether management characterizes the quarter’s integrated gas and oil trading strength as repeatable or explicitly ties it to one-off, conflict-driven volatility—the latter is our base case.
- Net debt trajectory: Whether the guided working-capital reversal actually brings gearing back down from 23.2%, which matters for the credibility of the 40%-50% payout framework if oil prices were to soften.
The following are excerpts from Morningstar’s company report on Shell.
Fair Value Estimate for Shell
We don’t expect this print to move our £35.80 per share fair value estimate. The quarter is shaping up to be a study in offsetting forces, and the July 7 second-quarter update note gave us most of the picture already.
On one side, the Middle East conflict has knocked out Shell’s Pearl gas-to-liquids facility in Qatar since a March attack on the Ras Laffan Industrial City, cutting Integrated Gas production guidance to 610,000-650,000 barrels of oil equivalent per day from 909,000 in the first quarter—a nearly one-third decline. On the other side, the same conflict has driven the kind of commodity-price volatility that plays directly to Shell’s largest structural strength: its trading and optimization franchise.
Integrated Gas trading is guided to be significantly higher than the first quarter, refining margins are guided near USD 20/bbl versus USD 17/bbl, and indicative chemicals margins have nearly doubled to about USD 240/tonne from USD 139/tonne. Working capital, which built up by USD 11.2 billion in the first quarter on the late-quarter price spike, is guided to reverse into a USD 1 billion-USD 6 billion inflow, which should support deleveraging after net debt rose to USD 52.6 billion (23.2% gearing) at the end of the first quarter.
Economic Moat Rating
Our no-moat rating rests on the view that Shell’s forecast excess returns at our USD 65/bbl midcycle Brent assumption are too thin to survive a full cycle, and that near-term trading windfalls—however large—are not evidence of durable competitive advantage. A strong trading quarter caused by a war is the opposite of a moat: it’s optionality on volatility, not a repeatable structural edge.
Financial Strength
Although Shell no longer targets a specific gearing ratio, it aims to maintain AA credit metrics through the cycle.
Given the recent strong oil prices, Shell has achieved these targets. At year-end 2025, Shell had USD 45.7 billion in net debt for a gearing ratio of 20.7%.
In 2020, Shell cut its dividend by 66%, saving the company USD 10.5 billion annually. Rebasing of the dividend at a lower level gives Shell greater financial flexibility over the long term to execute its energy transition strategy. To maintain that flexibility, Shell plans to increase the dividend by 4% annually, but it has done so at a greater rate, given the recent favorable commodity price environment.
In total, it will distribute 40%-50% of operating cash flow to shareholders through the cycle, including dividends and repurchases. This is one of the highest payout ratios among its peers. It returned 42% in 2023 and 41% in 2024, when its target was 30%-40%, and 52% in 2025. Shell is currently repurchasing USD 3.5 billion in shares each quarter.
Shell plans cash capital expenditure of USD 20 billion-USD 22 billion in 2025-28, about the same amount it spent in 2024, but less than in prior years. It spent USD 21 billion in 2025.
Risk and Uncertainty
Shell holds a High Morningstar Uncertainty Rating based on fundamental exposure to commodity prices, evaluation of ESG risks, and the range of return outcomes used by our star rating system. Shell’s profits and cash flow are largely tied to hydrocarbon production and highly leveraged to oil price movements. Periods of prolonged low oil prices weaken returns on capital, and new oil and gas projects are unlikely to generate their projected economic results. Project cost overruns and/or completion delays are continued sources of uncertainty.
However, Shell’s large trading organization should help it capitalize on price volatility. Shell faces several ESG-related risks, but based on our framework, they are not collectively material enough to alter our scenario-analysis-determined uncertainty rating. ESG-related risks include changes in climate-related policies, such as a carbon tax, which could result in higher costs, reduced demand, or stranded resources. Operating in offshore environments exposes Shell to the risk of large oil spills that could result in material losses through lost revenue, fines or penalties, or loss of license to operate.
SHEL Bulls Say
- Shell stands to benefit from the rise in global gas demand and likely strong prices over the next decade as LNG becomes integral to managing renewable intermittency.
- Shell’s new CEO has reined in its transition strategy and refocused the company on capital discipline and returns, which should pay off for shareholders with greater cash returns.
- Downstream returns should improve as Shell reduces its downstream footprint to fewer integrated refining and chemical facilities while reducing fuel production and increasing higher-value chemical volumes.
SHEL Bears Say
- Shell’s large LNG position puts it at risk if renewable power generation grows faster than expected or intermittency issues are solved, meaning natural gas will no longer be needed as a bridge fuel.
- Shell is increasing hydrocarbon production but is doing so through LNG, as it lacks the oil volume growth of some of its peers.
- Shell’s transition strategy fails to fully satisfy either oil or ESG-minded investors, leaving both avoiding the shares, resulting in a trading discount to more focused peers.
This article was compiled by Christian Mayes.
