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Suncor: The Next-Most-Loved Integrated Energy Stock

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Analysts’ ratings for Suncor

In the previous article, we saw that all the analysts that cover Total (TOT) have given it “buys.” Now, let’s look at analysts’ ratings for Suncor Energy (SU).

Suncor has the second-highest number of “buy” ratings and the smallest market cap among the seven stocks under review at ~$50 billion.

The chart above shows that 11 (or 92%) of the 12 analysts covering Suncor have rated it as a “buy” or a “strong buy” in December. Its ratings have improved since December 2017, when it had fewer “buy” and “strong buy” ratings. In the same period, Suncor’s mean target price has risen 19% YoY (year-over-year) to 60.3 Canadian dollars per share ($45.2 per share). This target price implies a potential 46% gain from its current level. The stock’s gains have expanded in the past year due to the rise in the stock’s mean target price and the fall in its actual price.

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Most analysts call Suncor a “buy”

The majority of Wall Street analysts have rated Suncor as a “buy” due to its healthy financials and impressive earnings outlook. In the third quarter, Suncor’s adjusted earnings rose 80% YoY. Also, oil sands volumes touched record highs in the period, and Suncor continued to ramp up production at its megaprojects Fort Hills and Hebron. The company’s discretionary free fund flow rose 47% YoY in the quarter, and its total debt-to-total capital ratio of 27% stood below the global industry average—a favorable position.

Recently, the Government of Alberta announced an oil production cut to deal given the supply glut in the region. The government announced a cut of 325,000 barrels per day for the first quarter of 2019. Later, this will be reduced to 95,000 barrels per day for the rest of the year. Despite the cuts, Suncor expects its production to rise ~10% in 2019.

In the next article, we’ll review Royal Dutch Shell (RDS.A), which has 80% “buy” ratings, the third-best among its peers.

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