What to Expect From Suncor Energy (SU) This Earnings Season?

Suncor Energy SU is set to release third-quarter 2020 results after the closing bell on Wednesday, Oct 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 7 cents per share on revenues of $5.1 billion.

Let’s delve into the factors that might have influenced the Canadian energy giant’s performance in the September quarter. But it’s worth taking a look at Suncor Energy’s previous-quarter performance first.

Highlights of Q2 Earnings & Surprise History

In the last-reported quarter, the Calgary, Alberta-based operator missed the consensus mark due to lower commodity prices and reduced upstream production. Suncor Energy reported operating loss per share of 71 cents, wider than the Zacks Consensus Estimate of a loss of 44 cents. Moreover, the integrated oil company’s quarterly revenues of $3.1 billion came below the Zacks Consensus Estimate of $4.1 billion.

As far as earnings surprises are concerned, Suncor Energy beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering a negative earnings surprise of 15.12%, on average. 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

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter bottom line has been revised 22.2% upward in the last seven days. However, the estimated figure indicates 112.7% deterioration year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 32.1% decline from the year-ago period.

Factors to Consider This Quarter

Weak commodity prices and lower production are likely to have negatively impacted Suncor Energy’s output in the to-be-reported quarter.

In the previous quarter, Suncor experienced the wrath of declining oil prices, a trend that is most likely to have continued in the third quarter because of the continuation of the weak operating environment. In fact, the tough energy landscape meant that Suncor swung to a net loss during the first two quarters of 2020 and was forced to slash its dividend by more than half.

Suncor is also facing operational hurdles following a fire incident at the secondary extraction facilities of its Base Plant mine, which forced the firm to cut back its production outlook. The company expects its third-quarter average daily oil sands output to be 305,000-320,000 barrels, indicating a 26% decrease at the midpoint from 422,200 barrels per day a year ago.

However, as a counter to these negatives, Suncor Energy has also done a fairly admirable job at reducing costs. Its cash outflows as capital expenditure continue to fall as it reins in spending levels. Apart from significant capital cuts, the company should realize sizeable savings from a headcount reduction and operating cost control. All this is expected to have pushed Suncor Energy’s third-quarter earnings and cash flows higher.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Suncor Energy is likely to beat estimates in the fiscal first quarter. 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: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is +21.43%.

Zacks Rank: Suncor Energy has a Zacks Rank #4 (Sell).

Stocks to Consider

While earnings beat looks uncertain for Suncor Energy, here are some firms from the energy  space you may want to consider on the basis of our model:

Antero Midstream Corporation AM has an Earnings ESP of +9.89% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 28.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Devon Energy Corp. DVN has an Earnings ESP of +23.50% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Oct 29.

TC Energy Corporation TRP has an Earnings ESP of +1.45% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Oct 29.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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