Financial Analysis: Shell (NYSE:SHEL) versus Hess Midstream (NYSE:HESM)

Shell (NYSE:SHEL) and Hess Midstream (NYSE:HESM) are both oils/energy companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, risk, valuation, analyst recommendations, institutional ownership and dividends.

Dividends

Shell pays an annual dividend of $2.75 per share and has a dividend yield of 4.2%. Hess Midstream pays an annual dividend of $2.74 per share and has a dividend yield of 7.5%. Shell pays out 56.6% of its earnings in the form of a dividend. Hess Midstream pays out 116.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional and Insider Ownership

28.6% of Shell shares are owned by institutional investors. Comparatively, 92.4% of Hess Midstream shares are owned by institutional investors. 1.0% of Shell shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Shell and Hess Midstream”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shell	$323.18 billion	0.63	$19.36 billion	$4.86	13.54
Hess Midstream	$1.35 billion	5.87	$118.60 million	$2.36	15.39

Shell has higher revenue and earnings than Hess Midstream. Shell is trading at a lower price-to-earnings ratio than Hess Midstream, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Shell has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500. Comparatively, Hess Midstream has a beta of 1.51, meaning that its stock price is 51% more volatile than the S&P 500.

Profitability

This table compares Shell and Hess Midstream’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shell	5.17%	14.54%	6.86%
Hess Midstream	13.06%	47.87%	4.80%

Analyst Ratings

This is a summary of current recommendations for Shell and Hess Midstream, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shell	0	3	4	3	3.00
Hess Midstream	0	2	1	0	2.33

Shell presently has a consensus price target of $82.00, suggesting a potential upside of 24.60%. Hess Midstream has a consensus price target of $38.67, suggesting a potential upside of 6.49%. Given Shell’s stronger consensus rating and higher possible upside, analysts clearly believe Shell is more favorable than Hess Midstream.

Summary

Shell beats Hess Midstream on 10 of the 17 factors compared between the two stocks.

About Shell

Shell plc operates as an energy and petrochemical company Europe, Asia, Oceania, Africa, the United States, and Rest of the Americas. The company operates through Integrated Gas, Upstream, Marketing, Chemicals and Products, and Renewables and Energy Solutions segments. It explores for and extracts crude oil, natural gas, and natural gas liquids; markets and transports oil and gas; produces gas-to-liquids fuels and other products; and operates upstream and midstream infrastructure to deliver gas to market. The company also markets and trades natural gas, liquefied natural gas (LNG), crude oil, electricity, carbon-emission rights; and markets and sells LNG as a fuel for heavy-duty vehicles. In addition, it trades in and refines crude oil and other feed stocks, such as low-carbon fuels, lubricants, bitumen, sulphur, gasoline, diesel, aviation fuel, and marine fuel; produces and sells petrochemicals for industrial use; and manages oil sands activities. Further, the company produces base chemicals comprising ethylene, propylene, and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide, and ethylene glycol. Additionally, it generates electricity through wind and solar resources; produces and sells hydrogen; and provides electric vehicle charging services. The company was formerly known as Royal Dutch Shell plc and changed its name to Shell plc in January 2022. Shell plc was founded in 1907 and is headquartered in London, the United Kingdom.

About Hess Midstream

Hess Midstream LP owns, develops, operates, and acquires midstream assets and provide fee-based services to Hess and third-party customers in the United States. It operates through three segments: Gathering; Processing and Storage; and Terminaling and Export. The Gathering segment owns natural gas gathering and compression systems; crude oil gathering systems; and produced water gathering and disposal facilities. Its gathering systems consists of approximately 1,410 miles of high and low pressure natural gas and natural gas liquids gathering pipelines with capacity of approximately 660 million cubic feet per day; crude oil gathering system comprises approximately 570 miles of crude oil gathering pipelines; and produced water gathering system that includes approximately 300 miles of pipelines in gathering systems. The Processing and Storage segment comprises Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota; a 50% interest in the Little Missouri 4 gas processing plant located in south of the Missouri River in McKenzie County, North Dakota; and Mentor Storage Terminal, a propane storage cavern and rail, and truck loading and unloading facility located in Mentor, Minnesota. The Terminaling and Export segment owns Ramberg terminal facility; Tioga rail terminal; crude oil rail cars; and other Dakota access pipeline connections, as well as Johnson's Corner Header System, a crude oil pipeline header system. Hess Midstream LP was founded in 2014 and is based in Houston, Texas.