Suncor Energy: Will it Miss?

Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. ( SU - Analyst Report ) is scheduled to report its fourth-quarter and full-year 2012 results after the market closes on Tuesday, Feb 5, 2013.

In the third quarter, the company delivered a positive 13.33% earnings surprise, aided by volume growth at Oil Sands along with better refinery margins and start-up of operations in Libya. This represented the fourth straight quarter of positive earnings surprise. Let’s see how things are shaping up prior to this announcement.

Factors to Consider This Quarter

The operating scenario for oil sands developers will remain critical in the near to medium term. Suncor is also susceptible to oil and gas prices, which are inherently volatile and subject to complex market forces.

Suncor’s deep oil sands technology, though proven, is still vulnerable to potential implementation delays. In particular, there are risks related to growth and other capital projects that depend wholly or partly on new technologies. A high debt level and significant capital expenditure may also have adverse affects on the company’s earnings and cash flows.

In fact, the Zacks Consensus Estimate for the fourth quarter has moved down by 2 cents to 80 cents per unit over the last 30 days as the tendency for a downward revision was more obvious.

Earnings Whispers

Our proven model does not conclusively show that Suncor Energy is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy) or at least Zacks Rank #2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Negative Zacks ESP:The Most Accurate estimate stands at 78 cents while the Zacks Consensus Estimate is higher at 80 cents. This results in a difference of -2.50%.

Zacks Rank #3 (Hold): Suncor’s Zacks Rank #3, 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.

Other Stocks to Consider

Here are some other companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Atlas Energy L.P ( ATLS - Snapshot Report ) , earnings ESP of +260.00% and Zacks Rank #1 (Strong Buy).

Northern Tier Energy LP ( NTI - Snapshot Report ) , earnings ESP of +7.97% and Zacks Rank #1 (Strong Buy).

Hercules Offshore Inc. ( HERO - Snapshot Report ) , earnings ESP of +14.29% and Zacks Rank #2 (Buy).