It has been about a month since the last earnings report for Suncor Energy (SU). Shares have lost about 15.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Suncor Energy due for a breakout? 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 Energy Q4 Earnings Beat
Suncor Energy reported fourth-quarter 2022 operating earnings of $1.33 per share, beating the Zacks Consensus Estimate of $1.26. SU’s bottom line also improved from a profit of 71 cents per share in the year-ago period. This outperformance could be attributed to significantly higher crude oil and refined product realizations in the current quarter, reflecting an improved business environment.
The quarterly operating revenues of $10.2 billion beat the Zacks Consensus Estimate by 5.7%. It also increased by approximately 15.2% on a year-over-year basis. The company repurchased shares worth approximately C$725 million during the reported quarter.
Upstream: Suncor’s total upstream production in the fourth quarter of 2022 was 763,100 barrels of oil equivalent per day (boe/d), up 2.7% from 743,300 boe/d in the prior-year quarter. This was a result of increased output from the company's Oil Sands assets. SU’s upstream segment recorded adjusted operating earnings of C$2.297 billion compared with C$1.548 billion in the prior-year quarter.
Bitumen production rose significantly from 150,900 barrels per day to 170,600, surpassing the Zacks Consensus Estimate of 157,000 barrels per day. This increase was mainly driven by higher output from Fort Hills and a new quarterly production record achieved by Firebag.
Meanwhile, oil sands volumes in the reported quarter were 517,500 bbls/d compared with 515,000 bbls/d in the fourth quarter of 2021. The figure missed the consensus mark of 534,000 bbls/d.
During the fourth quarter of 2022, Syncrude operations’ output increased to 208,400 bbls/d from 191,600 bbls/d in the prior-year quarter. Moreover, Fort Hills reported fourth-quarter volumes of 69,500 bbls/d, higher than 55,500 bbls/d registered in the year-ago period.
Downstream: Adjusted operating earnings from the downstream unit increased to C$1,517 million from C$599 million in the year-ago period, on the back of improving gross margins. Suncor reported refined product sales of 548,200 bpd in the quarter under consideration, down from 550,100 bpd in the prior-year quarter.
Crude throughput came in at 440,000 barrels per day in the fourth quarter of 2022, down from 447,000 barrels per day in the year-ago period. Moreover, refinery utilization was 94% compared with 96% a year ago.
Total expenses in the reported quarter climbed to C$10.3 billion from C$9.1 billion in the year-ago period. This uptick was mainly caused by higher costs related to the purchase of crude oil and products, a rise in operating, selling and general costs, and an increase in transportation costs.
Suncor reported fourth-quarter cash flow from operating activities of C$3.9 billion, an increase from the prior-year quarter’s C$2.6 billion. The company incurred capital expenditure worth C$1.3 billion in the fourth quarter of 2022.
As of Dec 31, 2022, SU had cash and cash equivalents worth C$2 billion and total long-term debt of approximately C$9.8 billion. Its total debt-to-capital ratio was about 20%. In the fourth quarter, the company distributed C$700 million in dividends.
Suncor Energy expects its 2023 production guidance to be in the 740,000-770,000 boe/d range. The Oil Sands operations’ yield is expected to be in the 385,000-425,000 bbls/d range, with Fort Hills at 85,000-95,000 bbls/d, Syncrude at 175,000-190,000 bpd, and Exploration and Production at 65,000-75,000 boe/d.
Suncor also anticipates full-year capital expenditure guidance range of C$5.4 billion-C$5.8 billion. It also expects the full-year current income tax expense range to be between C$2.6 billion and C$2.9 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -14.67% due to these changes.
At this time, Suncor Energy has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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