A month has gone by since the last earnings report for Suncor Energy Inc. (SU - Free Report) . Shares have added about 2.2% in that time frame
Will the recent positive trend continue leading up to its next earnings release, or is SU 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 catalysts.
First-Quarter 2018 Results
Suncor Energy reported first-quarter 2018 operating earnings per share of 48 cents, surpassing the Zacks Consensus Estimate of 45 cents. Strong refining margins and remarkable refinery utilization of 98% along with rebounding crude prices led to the better-than-expected results. The bottom line also improved from the prior-year earnings of 37 cents per share.
Quarterly operating earnings came in at C$985 million compared with C$812 million in the year-ago quarter, reflecting an increase of 21.3%.
Meanwhile, quarterly revenues of $6,924 million lagged the Zacks Consensus Estimate of $7,600 million. However, the top line increased from $5,924 million in the year-ago quarter.
Total upstream production in the reported quarter was 689,400 barrels of oil equivalent per day (Boe/d), decreasing from the prior-year level of 725,100 Boe/d. The decline in production was due to operational challenges in Oil Sands Base, along with lower contribution from the Exploration and Production segment.
Oil Sands operations volume was 404,800 barrels per day (Bbl/d) compared with 448,500 Bbl/d in the year-ago quarter. The decrease can be attributed to lower output and upgrader utilization from Oil Sands Base due to weather issues early in the quarter, partially offset by robust In Situ production.
Production from Syncrude operations was 142,300 Bbl/d compared with 142,100 Bbl/d in the year-ago quarter. In the quarter under review, Syncrude upgrader reliability was 71%, lower than 75% in the year-ago quarter.
Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 117,700 Boe/d compared with 134,500 Boe/d in the prior-year quarter. Lower production in the United Kingdom and East Coast Canada was partially offset by the increased output at Hebron.
Notably, the Fort Hills project netted 29,800 Bbl/d to Suncor in the quarter under review. The second extraction train at Fort Hills came online at the end of the first quarter, which is expected to further ramp up the production capacity.
Also, refinery utilization came in at 98% compared with 93% in the year-ago quarter.
The company’s refined product sales of 512,900 Bbl/d increased from the prior-year quarter level of 508,000 Bbl/d on the back of higher crude throughput levels, with record wholesale and retail volumes in Canada. Crude throughput stood at 453,500 Bbl/d in the first quarter, marking the highest ever level.
Total expenses in the reported quarter increased to C$7,596 million from C$6,001 million in the year-ago quarter. The increase in total expenses is mainly attributed to higher financing and operating costs.
Balance Sheet & Capital Expenditures
As of Mar 31, 2018, Canadian energy giant had cash and cash equivalents of C$2,083 million and total long-term debt of C$13,650 million. The total debt-to-capitalization ratio was approximately 23.1%. The company incurred capital expenditure of C$1,214 million in the quarter under review.
Dividend and Share Repurchase
Suncor returned C$590 million to its shareholders through dividends and bought back C$389 million of outstanding shares in first-quarter 2018.
On May 1, 2018, the company’s board members approved a quarterly dividend of 36 cents per share. This translates to an annualized dividend of $1.44 per share. The dividend will be paid on Jun 25, 2018 to shareholders of record as of Jun 4.
Suncor’s prior guidance related to production, cash costs and capex remain unchanged. The full-year outlook for E&P production is envisioned to lie within the range of 105,000-115,000 Boe/d. The same for Syncrude production is projected between 150,000 Bbls/d and 165, 000 Bbls/d. Furthermore, the full-year outlook for cash operating costs is anticipated to lie in the $32.50-$35.50/Bbl band. For 2018, capex is expected to come in at $4.5-$5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.
At this time, SU has a nice Growth Score of B. Its Momentum is doing a bit better with an A. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise SU has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.