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Canada’s biggest energy firm Suncor Energy Inc. (SU - Analyst Report), is set to release its third quarter 2013 results after the market closes on Wednesday, Oct 30.

Last quarter, Suncor reported disappointing results – a 10.45% negative surprise – due to lower production levels in the ‘Oil Sands’ segment and an increase in operating costs. The company has missed the Zacks Consensus Estimate in three out of the last four quarters and has an average earnings surprise of -3.25%.

Factors to Consider in Q3

Calgary, Alberta-based Suncor Energy, Inc. is Canada’s premier integrated energy company. With a large portfolio of growth opportunities, a unique asset base and high return potential in the long run, the company has a competitive edge over its peers.

However, we remain worried about Suncor’s high debt level and significant anticipated capital expenditure requirements. We also believe that operational and project execution risks will keep the stock under pressure.

Last month, Suncor completed the sale of a major portion of its Western Canada-based conventional natural gas assets. Though the move brings funds for the company, it is likely to affect production.

Moreover, volatile crude prices in the recent past have undoubtedly cast its shadow on the performance of the company in the third quarter. Any steep drop in prices may render oil sands mining initiatives as economically unviable considering the high up-front costs required for their development.

Earnings Whispers?

Our proven model does not conclusively show that Suncor will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately this is not the case here as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at 81 cents, while the Zacks Consensus is at 84 cents. This results in a difference of -3.57%.

Zacks Rank: Southern Company’s Zacks Rank #3 (Hold), however, increases the predictive power of ESP. That said we also need to have a positive ESP to be confident of an earnings surprise call.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks unlikely for Suncor, here are other energy firms you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat this quarter:

Exterran Partners, L.P. (EXLP - Snapshot Report), with earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy).

Matador Resources Company (MTDR - Snapshot Report), with earnings ESP of +13.33% and a Zacks Rank #1 (Strong Buy).

Northern Oil and Gas, Inc. (NOG - Snapshot Report), with earnings ESP of +3.23% and a Zacks Rank #1 (Strong Buy).

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