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Is a Beat in Store for Suncor (SU) This Earnings Season?

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Suncor Energy (SU - Free Report) is set to release fourth-quarter 2020 results on Wednesday, Feb 3. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 12 cents per share on revenues of $5.7 billion.

Let’s delve into the factors that might have influenced the Canadian energy giant’s performance in the December quarter. But it’s worth taking a look at Suncor’s previous-quarter performance first.

Highlights of Q3 Earnings & Surprise History

In the last-reported quarter, the Calgary, Alberta-based operator beat the consensus mark on decreased operating, selling and general costs as a result of reduced production and its continuous cost-minimizing efforts. Suncor delivered an operating income per share of 15 cents, while the Zacks Consensus Estimate was pegged at a loss of 7 cents per share. However, the company’s quarterly revenues of $4.85 billion fell short of the Zacks Consensus Estimate of $5.09 billion due to ramped-down Fort Hills and Oil Sands production along with soft refined product sales.

As far as earnings surprises are concerned, Suncor beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering an earnings surprise of 63%, on average. This is depicted in the graph below:

Suncor Energy Inc. Price and EPS Surprise

Suncor Energy  Inc. Price and EPS Surprise

Suncor Energy Inc. price-eps-surprise | Suncor Energy Inc. Quote

 

Trend in Estimate Revision

The Zacks Consensus Estimate for the fourth-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates 130.8% deterioration year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 21.9% decline from the year-ago period.

Factors to Consider This Quarter

In the previous quarter, Suncor’s downstream business delivered solid results, a trend that is most likely to have continued in the fourth quarter because of strong refinery utilization. Per the Q3 earnings transcript, the company reported utilization rates of more than 95% exiting the September quarter and is confident of maintaining the momentum in the October-December period. Further, the company’s involvement in energy trading is likely to have enabled it to realize substantial value in crude and refined products.

Suncor Energy has also done a fairly admirable job at reducing costs. Its cash outflows as capital expenditure continue to fall as it reins in spending levels. Apart from significant capital cuts, the company should realize sizeable savings from headcount reduction and operating cost control. In fact, Suncor announced targeted reductions of $1 billion in annual operating costs for 2020. All this is expected to have pushed Suncor Energy’s fourth-quarter earnings and cash flows higher.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Suncor this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Suncor has an Earnings ESP of +40.43% and a Zacks Rank #2.

Other Stocks to Consider

Suncor is not the only energy company looking up this earnings cycle. Here are some other firms from the space that you may want to consider on the basis of our model:

NuStar Energy L.P. (NS - Free Report) has an Earnings ESP of +21.21% and a Zacks Rank #2. The firm is scheduled to release earnings on Feb 4.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exxon Mobil Corporation (XOM - Free Report) has an Earnings ESP of +107.40% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 2.

Patterson-UTIEnergy, Inc. (PTEN - Free Report) has an Earnings ESP of +4.99% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 4.

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