BP and Shell earnings previews: which is the better share to buy?

Can a new joint venture boost BP’s share price after its leadership turmoil?

The European Commission has approved a joint venture between Iberdrola and BP PLC (BP) to establish electric vehicle charging stations across the Iberian Peninsula. The announcement has boosted the energy giant’s share price by 1% on Friday and aligns it with the growing trend towards electric mobility and the need for robust charging infrastructure.

Meanwhile, BP's leadership turmoil, marked by the resignation of CEO Bernard Looney followed shortly after by that of its US top executive, has raised concerns among investors. However, the company's interim chief executive, Murray Auchincloss, has reassured stakeholders that BP's transition strategy remains unchanged. The commitment to cutting oil and gas production, which has positioned BP as a leader in the industry, remains steadfast.

Auchincloss emphasised that BP will continue to focus on delivering its strategy safely and with discipline, aiming to meet its targets for 2025 and its net zero ambition for 2030. This commitment underscores BP's determination to navigate the changing energy landscape and contribute to a more sustainable future.

Will Shell’s low-carbon solutions job cuts help elevate its profits?

Shell PLC has announced plans to cut at least 15% of its workforce at its low-carbon solutions division and scale back its hydrogen business. These measures are part of CEO Wael Sawan's strategy to boost profits and reshape the company's focus. Sawan, who took over as CEO earlier this year, aims to prioritize higher-margin projects, maintain oil output, and increase natural gas production.

The decision to reduce the workforce in the low-carbon solutions unit, which currently employs around 1,300 people, will result in the elimination of 200 jobs in 2024. Additionally, 130 roles are under review. Shell plans to incorporate some of these positions into other divisions within the company, which has a total workforce of over 90,000 employees.

It is worth noting that Shell's decision to reduce its workforce and restructure its operations is not unique to the company. Many energy companies are undergoing similar transformations as they navigate the transition to a lower-carbon future.

BP and Shell earnings forecasts and analyst ratings

Data from Reuters shows that analysts expect BP’s Q3 revenue to decrease by 9.4% to $49,855 billion year-on-year and its Earnings-Per-Share (EPS) by 55.8% to 24 cents when it reports its third quarter earnings on Tuesday 31 October.

Shell, which is expected to report on its Q3 earnings on Thursday 2 of November, is forecast a decline of around 13% in its Q3 revenue and a drop of around 23.65% in its EPS to 95 cents.

Of the 23 analysts who currently cover BP, six have a ‘strong buy’, ten a ‘buy’ and seven a ‘hold’ rating with a median target price at 600 pence, approximately 9.5% higher than the current price (as of 27 October 2023).

This compares to 11 analysts who rate Shell with three of them seeing its shares as a ‘strong buy’ and eight as a ‘buy’. Their median long-term share price estimate comes in at €35.00, approximately 9.6% above the current Shell share price (as of 27 October 2023).

BP and Shell technical analysis

When comparing the BP share price to that of Shell it has risen by close to 12% year-to-date whereas the latter has so far risen by over 17%, both greatly outperforming the FTSE 100 index with its current year-to-date 3% loss.

The BP share price looks to be on track to revisit its 570.60 pence February peak while it remains above its early October low at 489.55p low. A rise above 570.60p would open the way for the October 2018 peak at around the 600 pence mark to be reached.

BP Daily Candlestick Chart

Only a currently unexpected bearish reversal and fall through the recent 489.55p low would negate the medium-term uptrend and push the May-to-July lows around the 450p level back to the fore.

When looking at the Shell daily chart, the medium-term uptrend is even more pronounced with the €32.64 mid-October high representing the first upside target ahead of the September 2014 and May 2018 peaks at €32.83 to €32.945 peaks. These may act as tough interim resistance to overcome, though.

Shell Daily Candlestick Chart

Only a currently unexpected bearish reversal and fall through the early October low at €29.09 would question the current medium-term bullish technical outlook.

Given Shell’s outperformance versus its direct competitor year-to-date and its smooth medium-term uptrend, it may be the better share to buy. Having said that, its nearby 2014 and 2018 peaks may throw a spanner in the works.