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Analysts’ Favorite Integrated Energy Stocks: Here Are the Top 10

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Part 4
Analysts’ Favorite Integrated Energy Stocks: Here Are the Top 10 PART 4 OF 11

Suncor Energy Is 3rd Place in Top 10: Are Ratings Strengthening?

Analyst ratings for Suncor

In this series, we’re looking at the ranking of integrated energy companies based on the “buy” ratings assigned to them by Wall Street analysts. We’ve already looked at analyst ratings for Royal Dutch Shell (RDS.A) and YPF (YPF). Now let’s look at the third integrated energy firm—Suncor Energy (SU)—which has more than 75.0% “buy” ratings.

Suncor Energy Is 3rd Place in Top 10: Are Ratings Strengthening?

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Suncor is a Canadian integrated energy company with oil sands, exploration and production, and refining and marketing business segments. The company’s market cap (capitalization) of $55.0 billion places it in the eighth spot among our ten integrated energy stocks.

The analyst rating chart above shows that 11 (or 79.0%) of the 14 analysts covering SU rated it a “buy” in September 2017. Another three analysts rated it a “hold.” The ratings have improved over September of last year when the stock had fewer “buy” ratings.

Implied gain in Suncor

SU’s mean price target of CAD (cash available for distribution) of 47.6 per share (or $39 per share) in September 2017 represents a 15.0% rise over the mean target price in September 2016. SU’s current mean target price implies a 17.0% rise from the current level. The implied gains have fallen in the period due to a steeper rise in Suncor stock (by 25.0%) compared to a rise in its mean target price (by 15.0%).

Suncor stock has risen 14.3% QTD (quarter-to-date). Oil prices have risen 2.5% QTD. Besides price appreciation, Suncor has provided returns to shareholders in the form of dividends. Its current dividend yield stands at 3.1%. Suncor’s dividends have risen in the past three years.

Valuations

Suncor trades at a forward PE (price-to-earnings) multiple of 30.9x, which is far above the peer average forward PE of 22.8x. Suncor also trades at 8.2x for its forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, which is higher than the peer average. The stock trades above the peer averages of both valuation matrixes, likely due to the company’s low leverage compared to its peers. Suncor saw a steep rise in its cash flow from operations in the first half of 2017 over the same period in 2016. The company has a series of projects in the pipeline, including Fort Hills and Hebron, which are likely to bring growth for the company in the form of higher production.

In the next part, we’ll look at analyst ratings for Chevron (CVX).

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