Why Analysts Like Suncor Energy

Analyst ratings for Suncor

Suncor Energy (SU) has the second highest “buy” ratings among the six integrated energy stocks (ExxonMobil, Chevron, Shell, BP, Total, and Suncor) we’re studying. Suncor also has the smallest market cap of around $50 billion among these six stocks.

Why Analysts Like Suncor Energy

As the chart above shows, 11 out of the 12 analysts covering Suncor rated it a “buy” or “strong buy” in May. Suncor’s mean target price of 55.7 Canadian dollars per share (or $41.5 per share) implies a 29% gain from the current level.

Majority of analysts rate Suncor a “buy”

The majority of Wall Street analysts rate Suncor a “buy” due to its growing earnings and an expanding upstream portfolio. In Q1 2019, Suncor’s adjusted earnings rose 23% to 1.3 billion Canadian dollars. Also, Suncor’s cash flow from operations rose steeply by 114% to 1.5 billion Canadian dollars. The company’s adjusted earnings rose across its business segments, namely Oil Sands, Exploration and Production, and Refining and Marketing. In comparison, the adjusted upstream earnings of peers like ExxonMobil (XOM), Chevron (CVX), and BP (BP) have fallen due to lower oil prices.

The rise in Suncor’s segmental earnings in the first quarter was mainly driven by higher upstream production and sales and strong sales in the company’s refining segment. Suncor’s upstream production rose by 11% YoY to 0.76 MM boed (million barrels of oil equivalent per day) in Q1. ExxonMobil, Chevron, and BP’s volumes stood at 3.98 MM boed, 3.04 MM boed, and 2.66 MMboed, respectively, in the quarter.

The rise in Suncor’s production was despite the production curtailments imposed by the government of Alberta. The production was driven by ramped up volumes at Fort Hills and Hebron. Plus, Syncrude’s strong asset reliability added to the production.