Shell shares tipped for upside as Jefferies repeats 'buy' rating

Shell PLC (LSE:SHEL, NYSE:SHEL) could see as much as 37% upside, according to Jefferies, despite investor unease over the oil major’s shareholder returns mix.

In a note, the broker repeated a 'buy' rating and a £44 price target after the group’s first-quarter call.

The investment bank said analysts on the call broadly welcomed Shell’s first-quarter operational delivery, but noted that the shares have underperformed peers as the market digests a “rebalancing” of distributions.

In Jefferies’ view, that shift represents a roughly 0.5 percentage point reduction in return yield, with a 5% higher dividend offset by a US$0.5 billion per quarter reduction in buybacks.

Management’s message, however, was that the capital return framework remains firmly intact.

Chief financial officer Sinead Gorman reiterated that “40 to 50% CFO cash returns are sacrosanct”, while also pointing to “our 18th quarter of a three-plus billion dollar buyback”.

Shell also retains “the ability to do additional share buybacks when the moment is right”, Gorman said, according to Jefferies.