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Suncor (SU) Stock Turns Sour Since Posting Q4 Earnings Miss
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The stock of Suncor Energy (SU - Free Report) has lost 5% since its fourth-quarter earnings announcement on Feb 2. Besides suffering a bottom-line miss, investors were spooked by the Canadian energy giant’s defensive outlook for stock buybacks.
What Did Suncor’s Earnings Unveil?
Suncor Energy reported fourth-quarter 2021 operating earnings of 71 cents per share, missing the Zacks Consensus Estimate by 5 cents due to increased costs and operational mishaps.
However, the company’s bottom line turned around from a loss of 7 cents in the year-ago period on the back of a considerable gain in realizations and increased refined product sales.
Quarterly operating revenues of $8.9 billion beat the Zacks Consensus Estimate by 4.2% and increased approximately 75% year over year.
With the commodity price environment remaining favorable, Suncor anticipates significant free cash flow in 2022, which will be divided on a 50-50 basis between debt reduction and repurchases.
Suncor Energy Inc. Price, Consensus and EPS Surprise
Upstream: Suncor’s total upstream production decreased 3.4% year over year to 743,300 barrels of oil equivalent per day (boe/d). The primary reason for this decline is lower output from the company’s exploration and production assets (consisting of international, offshore and natural gas), which slipped to 77,400 boe/d from 97,700 boe/d a year ago.
However, significantly higher crude price realizations meant that Suncor’s upstream segment recorded adjusted operating earnings of C$1.1 billion compared with a loss of C$86 million in the prior-year quarter.
Operating costs per barrel increased to C$28.10 in the quarter under review from C$26.50 in the corresponding period of 2020. Upgrader utilization increased to 96% from 95% in the comparable quarter of last year.
Bitumen production dropped from 157,200 boe/d to 150,900 boe/d but came ahead of the Zacks Consensus Estimate of 101 boe/d.
Oil sands volumes edged up to 515,000 boe/d from 514,300 boe/d a year ago and easily topped the consensus mark of 329 boe/d.
During the quarter, output from Syncrude operations fell to 191,600 barrels per day (bpd) from 207,400 bpd a year earlier. The company said the decrease in production was due to unplanned maintenance.
Meanwhile, Fort Hills reported average Q4 volumes of 55,500 bpd, lower than 62,400 bpd registered in the fourth quarter of 2020 – again due to the annual maintenance program.
Downstream: Adjusted operating earnings from the downstream unit rose to C$437 million from the year-ago figure of C$280 million, attributable to expanded margins and strong refined product sales. Suncor Energy recorded impressive refined product sales in the quarter under consideration, which increased to 550,100 bpd from the prior-year Q4 figure of 508,800 bpd.
Crude throughput came in at 447,000 bpd in the fourth quarter of 2021, up from 438,000 bpd in the year-ago period. Moreover, refinery utilization was 96% compared to 95% a year ago.
Financial Position
Total expenses in the reported quarter climbed to C$9.1 billion from C$7 billion in the year-earlier period. This uptick was mainly caused by higher costs related to the purchases of crude oil and products as well as a rise in operating, selling and general costs.
Suncor reported fourth-quarter cash flow from operating activities of C$2.6 billion in the fourth quarter, surging from the prior-year’s C$814 million. The company incurred a capital expenditure worth C$1.1 billion in the quarter under discussion.
As of Dec 31, 2021, Suncor Energy had cash and cash equivalents worth C$2.2 billion and carried a total long-term debt of C$14 billion. Its total debt to total capital was 27.6%.
During the full year 2021, the company distributed $1.6 billion of dividends and paid out C$2.3 billion in the form of share repurchases.
Guidance
Suncor has released guidance for production of 750,000-790,000 boe/d in 2022 and refined product sales of 550,000-580,000 bpd.
The company’s Fort Hills full-year production guidance stands in the range of 85,000-100,000 bpd, while for Syncrude it’s 175,000-190,000 bpd. The company expects cash operating costs in its oil sands operations between C$25 and C$28 per barrel.
Finally, Suncor expects capital spending of around C$4.7 billion this year, including C$3.7 billion for upstream activities and C$775 million for downstream.
Vermilion Energy: Vermilion Energy is valued at around $2.5 billion. The Zacks Consensus Estimate for VET’s 2022 earnings has been revised 45% upward over the past 60 days.
Vermilion Energy delivered a four-quarter average earnings surprise of 54.4%, including a 100% beat in Q3. VET shares have gained around 204.3% in a year.
Murphy USA: Murphy USA is valued at around $4.7 billion. The consensus estimate for MUSA’s 2022 earnings has been revised 10.6% upward over the past 60 days.
MUSA beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 24.6%. Murphy USA has rallied around 44.8% in a year.
ExxonMobil: ExxonMobil has a projected earnings growth rate of 27.3% for this year. The Zacks Consensus Estimate for XOM’s 2022 earnings has been revised 16.3% upward over the past 60 days.
ExxonMobil beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 5.8%. XOM shares have gained around 63.1% in a year.
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Suncor (SU) Stock Turns Sour Since Posting Q4 Earnings Miss
The stock of Suncor Energy (SU - Free Report) has lost 5% since its fourth-quarter earnings announcement on Feb 2. Besides suffering a bottom-line miss, investors were spooked by the Canadian energy giant’s defensive outlook for stock buybacks.
What Did Suncor’s Earnings Unveil?
Suncor Energy reported fourth-quarter 2021 operating earnings of 71 cents per share, missing the Zacks Consensus Estimate by 5 cents due to increased costs and operational mishaps.
However, the company’s bottom line turned around from a loss of 7 cents in the year-ago period on the back of a considerable gain in realizations and increased refined product sales.
Quarterly operating revenues of $8.9 billion beat the Zacks Consensus Estimate by 4.2% and increased approximately 75% year over year.
With the commodity price environment remaining favorable, Suncor anticipates significant free cash flow in 2022, which will be divided on a 50-50 basis between debt reduction and repurchases.
Suncor Energy Inc. Price, Consensus and EPS Surprise
Suncor Energy Inc. price-consensus-eps-surprise-chart | Suncor Energy Inc. Quote
Segment Performance
Upstream: Suncor’s total upstream production decreased 3.4% year over year to 743,300 barrels of oil equivalent per day (boe/d). The primary reason for this decline is lower output from the company’s exploration and production assets (consisting of international, offshore and natural gas), which slipped to 77,400 boe/d from 97,700 boe/d a year ago.
However, significantly higher crude price realizations meant that Suncor’s upstream segment recorded adjusted operating earnings of C$1.1 billion compared with a loss of C$86 million in the prior-year quarter.
Operating costs per barrel increased to C$28.10 in the quarter under review from C$26.50 in the corresponding period of 2020. Upgrader utilization increased to 96% from 95% in the comparable quarter of last year.
Bitumen production dropped from 157,200 boe/d to 150,900 boe/d but came ahead of the Zacks Consensus Estimate of 101 boe/d.
Oil sands volumes edged up to 515,000 boe/d from 514,300 boe/d a year ago and easily topped the consensus mark of 329 boe/d.
During the quarter, output from Syncrude operations fell to 191,600 barrels per day (bpd) from 207,400 bpd a year earlier. The company said the decrease in production was due to unplanned maintenance.
Meanwhile, Fort Hills reported average Q4 volumes of 55,500 bpd, lower than 62,400 bpd registered in the fourth quarter of 2020 – again due to the annual maintenance program.
Downstream: Adjusted operating earnings from the downstream unit rose to C$437 million from the year-ago figure of C$280 million, attributable to expanded margins and strong refined product sales. Suncor Energy recorded impressive refined product sales in the quarter under consideration, which increased to 550,100 bpd from the prior-year Q4 figure of 508,800 bpd.
Crude throughput came in at 447,000 bpd in the fourth quarter of 2021, up from 438,000 bpd in the year-ago period. Moreover, refinery utilization was 96% compared to 95% a year ago.
Financial Position
Total expenses in the reported quarter climbed to C$9.1 billion from C$7 billion in the year-earlier period. This uptick was mainly caused by higher costs related to the purchases of crude oil and products as well as a rise in operating, selling and general costs.
Suncor reported fourth-quarter cash flow from operating activities of C$2.6 billion in the fourth quarter, surging from the prior-year’s C$814 million. The company incurred a capital expenditure worth C$1.1 billion in the quarter under discussion.
As of Dec 31, 2021, Suncor Energy had cash and cash equivalents worth C$2.2 billion and carried a total long-term debt of C$14 billion. Its total debt to total capital was 27.6%.
During the full year 2021, the company distributed $1.6 billion of dividends and paid out C$2.3 billion in the form of share repurchases.
Guidance
Suncor has released guidance for production of 750,000-790,000 boe/d in 2022 and refined product sales of 550,000-580,000 bpd.
The company’s Fort Hills full-year production guidance stands in the range of 85,000-100,000 bpd, while for Syncrude it’s 175,000-190,000 bpd. The company expects cash operating costs in its oil sands operations between C$25 and C$28 per barrel.
Finally, Suncor expects capital spending of around C$4.7 billion this year, including C$3.7 billion for upstream activities and C$775 million for downstream.
Zacks Rank & Stock Picks
Suncor currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space are Vermilion Energy (VET - Free Report) , Murphy USA (MUSA - Free Report) and ExxonMobil (XOM - Free Report) . All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Vermilion Energy: Vermilion Energy is valued at around $2.5 billion. The Zacks Consensus Estimate for VET’s 2022 earnings has been revised 45% upward over the past 60 days.
Vermilion Energy delivered a four-quarter average earnings surprise of 54.4%, including a 100% beat in Q3. VET shares have gained around 204.3% in a year.
Murphy USA: Murphy USA is valued at around $4.7 billion. The consensus estimate for MUSA’s 2022 earnings has been revised 10.6% upward over the past 60 days.
MUSA beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 24.6%. Murphy USA has rallied around 44.8% in a year.
ExxonMobil: ExxonMobil has a projected earnings growth rate of 27.3% for this year. The Zacks Consensus Estimate for XOM’s 2022 earnings has been revised 16.3% upward over the past 60 days.
ExxonMobil beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 5.8%. XOM shares have gained around 63.1% in a year.