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Suncor (SU) to Report Q1 Earnings: Here's What to Expect

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Suncor Energy Inc. (SU - Free Report) is set to release first-quarter 2021 results on Monday, May 3. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 44 cents per share on revenues of $6.3 billion.

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

Highlights of Q4 Earnings & Surprise History

In the last-reported quarter, the Calgary, Alberta-based operator performed better than the consensus mark owing to decreased operating, selling and general expenses as a result of reduced production and the company’s continuous cost-minimizing efforts. Suncor had reported operating loss per share of 7 cents, narrower than the Zacks Consensus Estimate of a loss of 11 cents per share. However, revenues of $5.1 billion generated by this firm had come in below the Zacks Consensus Estimate of $5.7 billion due to ramped-down Fort Hills and Oil Sands production and soft refined product sales.

As far as earnings surprises are concerned, Suncor beat the Zacks Consensus Estimate in three of the last four quarters and missed in the other, delivering an earnings surprise of 77.59%, 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 first-quarter bottom line remained the same in the last seven days. Moreover, the estimated figure indicates a 393.33% surge year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests an 8.96% increase from the year-ago period.

Factors to Consider This Quarter

Suncor’s average oil sands sales volumes in the fourth quarter was 635.2 thousand barrels per day (MBbls/d), which reflected a jump from the previous quarter’s output of 539.2 MBbls/d. The upward trend is most likely to have continued in the first quarter on ramped-up utilization rates. As a reflection of this, the Zacks Consensus Estimate for oil sands sales volumes is pegged at 701 MBbls/d, indicating a sequential increase of 10.4%. This is expected to have provided support to the company’s fourth-quarter revenues and cash flows.

Suncor Energy has also done a fairly admirable job at reducing costs. Apart from a disciplined capital strategy, the company should realize sizeable savings from headcount reduction and operating cost control. In fact, Suncor was able to lower its total operating costs by around $1.3 billion year over year in 2020. The company has vowed to continue delivering strong cost performance this year which is expected to have had a positive effect on Suncor’s first-quarter earnings and margins.

However, on a somewhat bearish note, the integrated energy company is likely to have faced the repercussions from weakness in its downstream unit. In the previous quarter, 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. This trend is most likely to have continued in the to-be-reported quarter as well.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Suncor is likely to beat estimates in the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

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

Earnings ESP: Suncor has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 44 cents per share each.

Zacks Rank: Suncor currently carries a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult for the company this earnings season.

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

Stocks to Consider

While an earnings beat looks uncertain for Suncor, here are some firms from the energy space that you may want to consider on the basis of our model:

Exxon Mobil Corporation (XOM - Free Report) has an Earnings ESP of +8.09% and a Zacks Rank #1. The firm is scheduled to release earnings on Apr 30.

Viper Energy Partners LP (VNOM - Free Report) has an Earnings ESP of +40% and is Zacks #2 Ranked. The firm is scheduled to release earnings on May 3.

Transocean Ltd. (RIG - Free Report) has an Earnings ESP of +7.41% and a Zacks Rank #3. The firm is scheduled to release earnings on May 3.

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