Shell share price drops as Morgan Stanley trims rating on oil major

Shares in Royal Dutch Shell (LON:RDSA) have fallen into the red in London in today’s session as analysts at Morgan Stanley lowered their rating on the blue-chip oil major. Proactive Investors quoted the analysts as arguing that the Anglo-Dutch group’s planned share buybacks, dividends and debt reduction would not leave much room for capital expenditure to increase.

As of 13:07 GMT, Shell’s share price had given up 1.64 percent to 2,333.00p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.43 percent lower at 6,940.31 points. The group’s shares have lost more than seven percent to their value over the past year, as compared with a near 10-percent drop in the Footsie.

Morgan Stanley trims stance on Shell

Morgan Stanley cut its rating on Shell from ‘equal weight’ to ‘underweight’ today. Proactive Investors quoted the analysts as saying that the oil major’s planned share buybacks, dividends and debt reduction would require $66 billion in cash to the end of 2020 and do not leave much room for the group’s capex to increase.

The broker further said that the FTSE 100 group’s capex-to-dividend ratio was already unusually low, being by far the lowest in the sector and at a 20-year low in the company’s history, adding that the risk that Shell was either over-distributing or under-investing was higher than for its peers.

Other analysts on Anglo-Dutch group

JPMorgan Chase & Co, which is ‘overweight’ on Shell, lowered its valuation on the shares from 2,800p to 2,700p on Friday. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average price target of 2,919.67p.

Shell is scheduled to update investors on its fourth-quarter results on January 31.

As of 13:56 GMT, Tuesday, 22 January, Royal Dutch Shell Plc ‘A’ share price is 2,316.00p.