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Suncor Energy (SU) Down 9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Suncor Energy (SU). Shares have lost about 9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Suncor Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Suncor Energy Q3 Earnings Beat

Suncor Energy reported third-quarter 2022 operating earnings of $1.44 per share, beating the Zacks Consensus Estimate of $1.40. SU’s bottom line improved from a profit of 56 cents in the year-ago period. This outperformance could be credited to significantly higher crude oil and refined product realizations, reflecting an improved business environment in the current quarter and higher upstream production.

The quarterly operating revenues of $11.54 billion beat the Zacks Consensus Estimate by 18.5% and increased by approximately 42.3% year over year. Moreover, the company repurchased approximately C$1 billion worth of shares during the reported quarter.

Segmental Performance

Upstream: Suncor’s total upstream production increased by 3.65% year over year to 724,100 barrels of oil equivalent per day (boe/d). Significantly higher crude price realizations meant that SU’s upstream segment recorded adjusted operating earnings of C$2.565 billion compared with C$1.043 billion in the prior-year quarter.

Bitumen production increased significantly from 199,600 boe/d to 240,900 boe/d, primarily due to increased production from Fort Hills. Meanwhile, oil sands volumes in the reported quarter were 405,100 boe/d compared with 405,500 boe/d in the third quarter of 2021.

During the quarter, the output from Syncrude operations decreased to 147,300 barrels per day (bpd) from 190,200 bpd a year earlier. Moreover, Fort Hills reported average third-quarter volumes of 95,800 bpd, greater than the 50,800 bpd registered in the third quarter of 2021.

Downstream: Adjusted operating earnings from the downstream unit declined to C$753 million from the year-ago figure of C$848 million. Suncor recorded impressive refined product sales in the quarter under consideration, which increased to 577,300 bpd from the prior-year quarter figure of 551,500 bpd.

Crude throughput came in at 466,600 bpd in the third quarter of 2022, up from 460,300 bpd in the year-ago period. Moreover, refinery utilization was 100% compared with 99% a year ago.

Financial Position

Total expenses in the reported quarter climbed to C$15.5 billion from C$8.9 billion in the year-earlier period. This uptick was mainly caused by higher costs related to the purchase of crude oil and products, a rise in operating, selling and general costs, a hike in financial expenses and a small increase in transportation and distribution costs.

Suncor reported third-quarter cash flow from operating activities of C$4.449 billion, down from the prior year’s C$4.718 billion. The company incurred capital expenditure worth C$1.38 billion in the quarter under discussion.

As of Sep 30, 2022, SU had cash and cash equivalents worth C$4.66 billion and total long-term debt of approximately C$13.5 billion. Its total debt to total capital was about 26.1%. In the third quarter, the company distributed C$638 billion in dividends.

Guidance

Suncor maintained its guidance for production for 2022 to the range of 740,000-760,000 boe/d. The higher end of the production range for Oil Sands operations is maintained at 415,000 bpd, for Fort Hills at 90,000 bpd, for Syncrude at 185,000 bpd and for Exploration and Production at 80,000 bpd.

Suncor also maintained its full-year outlook for the capital expenditure guidance of the C$4.9 billion-C$5.2 billion range. Finally, the full-year current income tax expense range was also maintained in the C$4.4 billion-C$4.7 billion range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Suncor Energy has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Suncor Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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