Shell PLC (LSE:SHEL, NYSE:SHEL) has been added to Canadian broker RBC’s Energy Best Ideas list, reflecting clarity on the message from management, strong operational performance and a discounted valuation.
Shell generates significant amounts of cash, noted RBC, supported by its oil leverage and number-one presence in LNG.
Updated plans from management have focussed more on operational reliability and momentum, which should further support cash generation over the coming years.
RBC expects Shell to generate a superior FCF [free cash flow] yield on average relative to the sector over 2024-25 yet it trades at a discount on a discounted cash flow multiple basis.
Strong shareholder returns should help drive a re-rating, while continued de-leveraging sets Shell up to become a more stable business through the cycle, added the broker.
RBC also argued that earnings and cash flow volatility are lower than US peers despite the trading business, a feature underappreciated by the market with a difference between perception and financials.
Shell shares were down 0.5% at 2,856.5p on Wednesday.