What Lies Ahead for Suncor Energy (SU) in Q4 Earnings?

Suncor Energy Inc. SU is set to release fourth-quarter 2019 earnings results on Wednesday Feb 5, after market closes.

The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of 53 cents per share on expected revenues of $8.10 billion. There has been no change in estimates for the bottom line over the past seven days.

Let’s delve into the factors that might have impacted the company’s performance in the December quarter.

Factors to Impact Q4 Results

Suncor Energy’s third-quarter operating earnings from the downstream unit decreased to C$668 million from the year-ago figure of C$932 million due to lower refining margins. Refining margin was C$28.35 a barrel compared with C$34.45 a year ago, a trend that most likely continued in the fourth quarter as well.

However, the company witnessed total upstream production in the third quarter at 762,300 barrels of oil equivalent per day (Boe/d), up 2.5% from the prior-year level of 743,800 Boe/d. This ramped-up output was backed by robust operations in Fort Hills, Hebron and Syncrude projects, which are expected to have supported the company’s growth momentum and earnings in the reported quarter.

Following the Petro-Canada acquisition, Suncor Energy became one of the largest owners of oil sands in the world. The company’s newly-gained oil sands properties to supplement its operating portfolio in northern Alberta make it the leading producer in the region where its reserves come a close second to Saudi Arabia. The oil sands assets of the ‘new’ Suncor Energy promises long-term production growth as prices show signs of recovery from the recession-driven lows and depleting conventional reserves.

While significant activities at the principal projects are expected to have boosted Suncor Energy’s fourth-quarter upstream earnings, soft year-over-year refining margins might have affected the company’s downstream results.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Suncor Energy this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Suncor Energy has an Earnings ESP of -2.09%.

Zacks Rank: Suncor Energy carries a Zacks Rank #2.

The above combination acts as a spoiler as it leaves surprise prediction inconclusive.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, Suncor Energy’s earnings surpassed estimates. The company’s operating earnings per share of 55 cents edged past the Zacks Consensus Estimate of 54 cents on the back of higher output from Fort Hills and Syncrude operations.

However, the bottom line declined 24.6% from the prior-year’s 73 cents per share. Weaker year-over-year results can be attributed to unfavourable business environment causing low crude oil price realization along with increased operating and transport expenses.

Moreover, quarterly operating revenues of $7,500 million lagged the Zacks Consensus Estimate of $8,021 million. The top line also decreased 9.767% from $8,312 million in the year-ago quarter.

As far as the earnings surprise track is concerned, this Alberta-based company’s bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters, the average being 2.15%. This is depicted in the graph below:

Suncor Energy Inc. Price and EPS Surprise

Suncor Energy Inc. Price and EPS Surprise

Suncor Energy Inc. price-eps-surprise | Suncor Energy Inc. Quote

Stocks to Consider

Here are some stocks worth considering from the energy space, which per our model have the right combination of elements to beat on earnings this reporting cycle:

NuStar Energy L.P. NS has an Earnings ESP of +1.32% and a Zacks Rank of 2. The company is slated to report fourth-quarter earnings on Feb 5.

Paterson-UTI Energy, Inc. PTEN has an Earnings ESP of +2.46% and a Zacks Rank #3. The company is slated to announce fourth-quarter 2019 earnings on Feb 6.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +11.57% and a Zacks Rank of 3. The partnership is slated to release fourth-quarter earnings on Feb 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

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