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Why Is Suncor Energy (SU) Up 23.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Suncor Energy (SU - Free Report) . Shares have added about 23.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Suncor Energy due for a pullback? 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 Reports Narrower-Than-Expected Q4 Loss

Suncor Energy reported fourth-quarter 2020 operating loss per share of 7 cents, narrower than the Zacks Consensus Estimate of a loss of 11 cents per share. This improvement is led by decreased operating, selling and general costs as a result of reduced production and the company’s continuous cost-minimizing efforts.

However, the year-ago bottom line was a profit of 39 cents per share. This year-over-year downside is due to the ramped-down Fort Hills and Oil Sands production along with soft refined product sales.

Quarterly operating revenues of $5.06 billion fell short of the Zacks Consensus Estimate of $5.68 billion. Moreover, the top line dropped 30.4% from $7.27 billion in the year-ago quarter.

Upstream

Total upstream production in the reported quarter was 769,200 barrels of oil equivalent per day (Boe/d), down 1.15% from the prior-year level of 778,200 Boe/d. This fall in output was due to a decline in the Fort Hills and Oil Sands production plus planned maintenance activities at Oil Sands operations. Consequently, this upstream unit recorded an operating loss of C$379 million, wider than the loss of C$162 million in the prior-year quarter.

Notably, Fort Hills production came in at 62,400 barrels per day (BPD) in the quarter, lower than 87,900 BPD registered in the year-ago period.

Output from Syncrude operations scaled up to 207,400 Bbl/d from 156,300 Bbl/d a year earlier.

Oil Sands operations volume was 413,900 Bbl/d compared with 419,900 Bbl/d in the year-earlier quarter. Operating costs per barrel decreased to C$26.50 in the quarter under review from C$28.55 in the corresponding period of 2019. Meanwhile, upgrader utilization increased to 95% from 83% in the comparable quarter of last year.

However, Suncor Energy’s Exploration and Production segment (consisting of International, Offshore and Natural Gas segments) produced 97,700 Boe/d compared with 115,900 Boe/d in the prior-year quarter. Results were impacted by Terra Nova quayside preservation and natural declines in the United Kingdom.

Downstream

Operating earnings from the downstream unit plunged to C$268 million from the year-ago figure of C$558 million due to dented margins, lower crude throughput and weak refined product sales. Suncor Energy recorded soft refined product sales in the quarter under consideration, which fell to 508,800 Bbl/d from the prior-year level of 534,600 Bbl/d as a result of poor transportation fuel demand due to the novel coronavirus outbreak.

Crude throughput came in at 438,000 Bbl/d in the fourth quarter compared with 447,500 Bbl/d in the year-ago period. Also, refinery utilization was 95%.

Expenses

Total expenses in the reported quarter plummeted to C$7.03 billion from C$12.7 billion in the year-earlier period. This improvement is mainly led by lower costs related to the purchases of crude oil and products as well as a fall in operating, selling and general costs.

Financials

Importantly, cash flow from operating activities summed C$814 million in the fourth quarter, down from the prior-year figure of C$2.3 billion. The company incurred capital expenditure worth C$941 million in the quarter under discussion.

As of Dec 31, 2020, Suncor Energy had cash and cash equivalents worth C$1.89 billion and a total long-term debt of C$13.8 billion. Its total debt to total capital was 27.9%.

During the quarter under review, the company distributed $320 million as dividends.

Guidance

For the full year, this Alberta-based integrated player will continue to focus on strengthening its financial position. The company plans to maintain a disciplined capital approach and estimates to repay around C$1-C$1.5 billion debt in 2021, thereby indicating its ability to generate cash flow.
 

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months. The consensus estimate has shifted 109.52% due to these changes.

VGM Scores

Currently, Suncor Energy has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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