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Suncor’s Earnings Rise but Miss Estimate in Q2

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Suncor Energy (SU) posted its second-quarter earnings results on July 24. In the quarter, its revenue missed Wall Street’s estimate by 4%. Its second-quarter adjusted EPS stood at 0.80 Canadian dollars, about 11% lower than its estimated EPS of 0.90 Canadian dollars.

While Suncor’s earnings missed the estimate, they rose 10% YoY (year-over-year) in the quarter.

Suncor’s adjusted earnings rose from 1.190 billion Canadian dollars in the second quarter of 2018 to 1.253 billion Canadian dollars in the second quarter of 2019. The increase was due to a rise in Oil Sands and R&M (Refining and Marketing) earnings partly offset by a fall in E&P (Exploration and Production) earnings.

Suncor’s earnings review

Suncor’s earnings in the Oil Sands segment rose 62% YoY to 651 million Canadian dollars in the second quarter. The segment added 52% to Suncor’s total earnings in the quarter. The rise was the result of higher volumes partly offset by weaker realizations. Suncor’s hydrocarbon output rose due to lower planned upgraded maintenance at oil sands and Syncrude. Better Syncrude reliability and higher volumes at Fort Hills also boosted production. However, the Government of Alberta’s mandatory production cuts partly offset this rise in output.

Further, in the second quarter, Suncor’s R&M earnings rose 1% YoY to 677 million Canadian dollars due to higher throughputs and better margins. However, Suncor’s E&P earnings fell 21% YoY to 247 million Canadian dollars due to lower volumes and weaker realizations. The segment contributed 20% to Suncor’s total earnings in the second quarter of 2019 compared to 26% in the second quarter of 2018.

In the quarter, Suncor raised 750 million Canadian dollars in medium-term debt but repaid 1.3 billion Canadian dollars in short-term debt and 140 million Canadian dollars in long-term high-interest debt. Thus, the company improved its balance strength and flexibility in the quarter.

Peer comparison

Analysts expect Royal Dutch Shell’s (RDS.A) and Chevron’s (CVX) EPS to rise 10% YoY and 2% YoY, respectively, in the second quarter. However, they expect ExxonMobil’s (XOM), BP’s (BP), and Petrobras’s EPS to fall 25%, 7%, and 11%, respectively, in the quarter.

To learn more about ExxonMobil’s and Chevron’s earnings expectations, read Will Chevron Outperform ExxonMobil in Q2?

Dividends and share repurchases

Suncor has announced that it will pay a dividend of 0.42 Canadian dollars per share to its shareholders on September 25, 2019. The dividend will represent a 17% YoY increase.

Suncor’s dividend yield stands at 4.0%. However, Suncor’s yield is lower than those of its peers. BP’s and Royal Dutch Shell’s dividend yields stand at 6.2% and 5.9%, respectively. Total’s current yield stands at 5.4%. Further, ExxonMobil’s, Equinor’s, and Chevron’s current yields stand at 4.6%, 5.0%, and 3.8%, respectively.

In the second quarter, Suncor paid dividends of 658 million Canadian dollars and repurchased 552 million Canadian dollars’ worth of shares. Suncor’s total dividend and repurchase cash outflow rose 1% YoY to 1.2 billion Canadian dollars in the quarter.

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