Shell shares surge after results, driving FTSE 100 higher

London stocks climbed on Thursday, thanks to strong results from oil and gas giant Shell, which announced a $2 billion share buyback plan, with mining shares also lending support.

The FTSE 100
was up 1% to 7085.12. The best sector across the London Stock Exchange was oil & gas and the worst was telecommunications.

Shares of heavily-weighted Royal Dutch Shell

climbed over 5%, with rival BP

up 3%. Shell reported a fall in second-quarter net profit, but said adjusted earnings on a current cost of supply basis rose to $5.53 billion, beating forecasts. The energy group also launched a $2.0 billion buyback.

However, adjusted earnings on a current cost of supply basis rose to $5.53 billion from $3.23 billion, beating a market consensus of $5.07 billion calculated by Vara Research and based on 21 analysts’ estimates.

“RD Shell’s relationship with equity investors has been sorely tested in recent years, but we now look to be finding a pathway back,” said a team of Citi analysts led by Alastair Syme, in a note to clients. “That said there are remaining issues – investor memories are long and we continue to argue the portfolio is degraded versus peers – that we think will keep this valuation at the lower-end of the peer range.”

The biggest gainer in the FTSE 100 was publishing and events company Informa which rose 6%. Results on Thursday revealed “pretty reassuring on FY21 guidance and forward booking commentary,” said Barclays analysts Nick Dempsey and Matilda Durazzano.

Shares of Anglo American
were also a big gainer, surging over 5% after the mining giant it reported a significantly higher profit for the first half of the year, and said it would return $4.1 billion to shareholders via dividends and share buybacks. Those gains helped lift the entire sector, with Rio Tinto

Shares of pest killer Rentokil Initial
were a top gainer after the company reported that profit more than doubled for the first half of the year on higher revenue, with results ahead of its expectations.

The biggest faller was medical equipment maker Smith & Nephew
which fell 8% , despite upbeat results.

“We are not even going to say it is overdone as even directionally we find the move puzzling. Q2 2021 revenues were better than expected, H1 2021 trading profits were (exactly) in line with consensus and both revenue growth and trading margin guidance for FY 2021 were unchanged,” said Citi analysts Tom Jones and Odysseas Manesiotis, dismissing the share drop in a note to clients.

“The stock had also done little prior to the results, making it hard to argue that expectations were running high,” the pair said.

The British pound fetched $1.3956 versus the previous close of $1.3903.

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