Leading integrated energy firm
) reported mixed third-quarter 2012 results on October 31, 2012,
with earnings per share topping our expectation and revenue
coming below our projection.
We cover below the results of the recent earnings announcement,
subsequent analyst estimate revisions and the Zacks ratings for
the short-term and long-term outlook on the stock.
Third Quarter Recap
Suncor's quarterly earnings per share, excluding certain items,
came in at 85 Canadian cents (85 US cents) in the third quarter,
surpassing the Zacks Consensus Estimate of 75 US cents.
Comparing year over year, the results dropped 25.4% from C$1.14
per share earned in the prior-year quarter, primarily due to
steeper operating expenses and low oil price realized.
In the reported quarter, total revenue of C$9.60 billion ($9.64
billion) slipped 7.9% from the year-ago level as well as missed
Zacks Consensus Estimate by 6.0%.
Agreement of Analysts
Looking at the estimates' revision trend, it becomes clear that
most of the analysts project a mixed outlook for Suncor through
the last leg of 2012.
Of the total 7 analysts covering the stock, 3 have raised their
estimates and 2 have moved in the opposite direction over the
last 30 days for the last quarter of 2012. In the last 7 days,
one analyst revised its estimate downward, while none increased
For fiscal 2012, 8 analysts (out of 12 covering the stock) have
upped their estimates in the last 30 days, while 4 analysts went
for downward revisions. However, over the last 7 days, only two
analysts decreased the earnings estimate, as against no upward
The estimate revisions for the upcoming quarter and full-year
2012 indicate the analysts' sentiment based on the company's
resource rich asset line up, strong market position and wide
range of growth opportunities. However, the not-so-favorable oil
and natural gas market conditions along with environment
regulations continue to be an overhang on the company's shares.
Magnitude of Estimate Revisions
Reflecting the influence from analysts' earnings revision, in the
last 30 days, the Zacks Consensus Estimate for the fourth quarter
jumped to 85 cents from 78 cents. Seven days ago, the earnings
estimate was 86 cents.
For the full year, the earnings estimate moved up to $3.36 from
$3.07, over the last 30 days. A week before, the estimate
recorded was $3.39.
With respect to earnings surprise, Suncor showed positive trend
in the last 4 quarters. The company recorded a minimum surprise
of 1.2% in the first quarter of 2012 to the maximum of 13.3% in
the third quarter of 2012. On an average, the earnings surprise
was a positive 6.9%.
We are maintaining our Neutral recommendation on the stock, as we
see limited upside over the near term. Suncor currently retains a
Zacks #3 Rank, (short-term Hold rating).
One of the premier energy outfits in Canada, apart from
Canadian Natural Resources Ltd.
), Suncor is characterized by a robust portfolio of high-return
projects, unique asset base and various strategic initiatives. We
believe that the company will reap benefits from its oil-weighted
production mix and strong on-going in situ operations.
However, we prefer to stay on the sidelines due to the unstable
oil and natural gas fundamentals, inflationary cost conditions
and operational hindrances. Foreign currency fluctuations also
pose a major threat for the company.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago
that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use
today. The Zacks Rank for stock trading in a 1 to 3 month time
horizon and the Zacks Recommendation for long-term investing (6+
months). These "Earnings Estimate Scorecard" articles help
analyze the important aspects of estimate revisions for each
stock after their quarterly earnings announcements. Learn more
about earnings estimates and our proven stock ratings at:
CDN NTRL RSRCS (CNQ): Free Stock Analysis
ENCANA CORP (ECA): Free Stock Analysis Report
SUNCOR ENERGY (SU): Free Stock Analysis
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