NEW YORK (TheStreet) --Shares of Royal Dutch Shell (RDS.A) are gaining by 2.21% to $44.47 on Tuesday afternoon as the company announced it planned to complete its $53 billion merger with BG Group (BRGYY) by February 15.
Shell decreased the capital spending plan for the combined company by $2 billion to $33 billion in order to help withstand lower oil prices and maintain dividend payments, Reuters reports.
"This should improve Shell's ability to cover both dividends and investments. The result will be a more competitive and stronger company, for both sets of shareholders, in today's volatile oil price world," Shell Chairman Chad Holliday said in a statement.
Investors have voiced concerns that plummeting oil prices would undermine the benefits of the deal, Reuters added and Shell responded with more spending cuts and cost savings during the year.
The merger received regulatory approval from China last week, which was the last outstanding approval needed, Reuters noted.
Shell and BG released their prospectuses on Tuesday seeking approval of the takeover from their shareholders at their meetings on January 27 and January 28 respectively, according to Reuters.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate ROYAL DUTCH SHELL PLC as a Hold with a ratings score of C. A) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 36.9%. Since the same quarter one year prior, revenues fell by 36.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ROYAL DUTCH SHELL PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($6.20 versus $4.70).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 266.2% when compared to the same quarter one year ago, falling from $4,463.00 million to -$7,416.00 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 265.71% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full analysis from the report here: RDS.A