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Why Is Suncor Energy (SU) Down 3.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Suncor Energy (SU). Shares have lost about 3.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Suncor Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Suncor Energy Q1 Earnings & Revenues Beat

Suncor Energy reported first-quarter 2024 adjusted earnings of $1.05 per share, beating the Zacks Consensus Estimate of 90 cents. The outperformance could be primarily attributed to increases in oil sands production and strong demand for refined products.

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Operating revenues of $9.3 billion beat the Zacks Consensus Estimate by 7.6%. The top line also increased approximately 2.5%.

Suncor Energy’s board of directors approved a quarterly dividend of 54.5 Canadian cents per share, on its common shares, payable on Jun 25, 2024, to shareholders of record at the close of business on Jun 4.

Alberta-based integrated energy company distributed C$1 billion to its shareholders, consisting of C$700 million in dividends and C$300 million in share repurchases during the quarter under review.

Suncor reached a new milestone in oil sands production, hitting an all-time quarterly high. This is attributed to the increased working interest in Fort Hills and record fire bag production. Additionally, the company posted its highest-ever refining throughput and recorded peak refined product output.

Segmental Performance

Upstream: Total production in this segment increased 3.3% year over year to 835,000 barrels of oil equivalent per day (boe/d) from 742,100 boe/d.

The company’s exploration and production volume (international, offshore and natural gas) slipped 24.9% to 50,300 boe/d from 67,000 boe/d in the year-ago quarter. This was due to the divestment of SU’s U.K. portfolio and the absence of production from White Rose.

Adjusted operating earnings totaled C$1.81 billion compared with C$1.82 billion in the year-ago quarter.

Operating cost per barrel decreased to C$26.85 from C$29.6 in the corresponding period of 2023.  Upgrader utilization increased to 107% from 95% a year ago.

Bitumen production rose to 240,000 boe/d from 177,300 boe/d in the previous year. This increase was driven by higher overall production levels.

Oil sands production climbed to 545,000 boe/d from 497,800 boe/d a year earlier. This improvement stemmed from robust asset performance at Oil Sands Base.

Fort Hills reported an average first-quarter volume of 177,600 barrels per day (bpd), higher than the year-ago quarter’s level of 74,700 bpd.

The cash operating cost per barrel dropped to C$32.85 from C$41.4 in the prior-year period. This decrease in cost was due to the increased production volumes.

Downstream: Adjusted operating earnings from the unit increased to C$1.1 billion from the year-ago quarter’s reported figure of C$998 million. The growth in adjusted operating earnings was mainly driven by higher refinery production and a FIFO inventory valuation gain during the reviewed quarter.

Refined product sales totaled 581,000 bpd, up from the prior-year quarter’s level of 514,800 bpd. Strong refinery output and the company's effective use of its extensive domestic sales network and export channels were key factors for the results during this period.

Refinery crude throughput totaled 455,300 bpd compared with 367,700 bpd in the year-ago period.  Refinery utilization was 98% compared with 79% a year ago. The increase in refinery crude throughput was due to strong utilization rates across all refineries during the quarter under review.

Financial Position

Total expenses increased 8% to C$10.3 billion from the prior-year quarter.

Cash flow from operating activities amounted to C$2.8 billion, up from the prior-year quarter’s level of C$1 billion. Suncor Energy incurred capital expenditures worth C$1.3 billion in the first quarter of 2024.

As of Mar 31, 2024, the company had cash and cash equivalents of C$2.5 billion and long-term debt of C$11.3 billion. Its total debt to total capital was 21.3%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Suncor Energy has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Suncor Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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