What to Expect When Suncor Reports

Suncor’s earnings are out Oct. 30.

| More on:
The Motley Fool

Top Canadian oil producer, Suncor Energy (TSX: SU) (NYSE: TSX) is out with earnings on Oct. 30. Let’s take a closer look at what we should look for when it reports.

What do analysts want to see?

Analysts currently estimate that Suncor will turn in earnings of $0.81 a share on revenue of more than $11 billion. If history is our guide, Suncor will either exceed or miss that number by more than 10%. In the past four quarters it has missed estimates twice and beat it twice.  Analyst estimates have been a guess, at best.  However, if the company does actually meet earnings estimates it would represent a $0.04 drop from the year ago quarter.

That said, quite honestly, earnings numbers for an oil company can be meaningless. These numbers are typically impacted by one-time items like gains from hedging oil and gas exposure or temporary hits due to infrastructure issues or the weather. That’s why it’s important for investors to drill down past the headline numbers when Suncor reports.

If history is our guide

For example, last quarter’s earnings were just $0.62 per share, which was down by $0.18 per share from the prior year. Planned maintenance, production constraints, and flooding in northern Alberta all put pressure on earnings in the last quarter. Further, while the headline earnings number represented $934 million in operating earnings, Suncor actually delivered $2.25 billion or $1.49 per share in cash flow from operations. Investors often miss that oil and gas companies typically have much higher cash flow than earnings would seem to indicate.

What should we be looking for instead?

At this point, we already should have a pretty good idea how Suncor’s quarter will shape up. Peers like Cenovus (TSX: CVE) (NYSE: CVE) and Husky (TSX: HSE) already reported that higher oil prices drove the quarter. For Cenovus that meant a 40% boost in its operating cash flow in the quarter. Husky’s cash flow was up a more modest 6%. However, at the same time both integrated oil companies saw refining margins shrink. In Cenovus’ case its refining cash flow plunged by 75%, while Husky was also hurt by lower refining margins. Suncor investors should be on the lookout for deviations of that storyline.

The other important area to watch is if Suncor’s view of the future has changed at all. We already know that it sold the majority of its natural gas business in the quarter. That billion dollar sale will show up in its earnings release. Investors
will want to pay attention to what Suncor sees next. Are there any changes to its outlook? Are any future projects being delayed? These are questions investors should keep in mind when Suncor’s earnings hit the wire.

Investor takeaway

As long-term investors we are more concerned with the long-term outlook than the short-term earnings number. We know that quarterly earnings are just a brief checkup on our long-term journey. So be sure to tune in to Fool Canada after Suncor’s earnings are released for our take on the numbers that matter for long-term investors.

More from The Motley Fool
Interested in a top small-cap stock idea to go with your large-cap oil investment? The Motley Fool’s senior investment advisor has a great small-cap just for you. Click here to download a FREE copy of “A Top Canadian Small Cap for 2013 — and Beyond.”

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Matt Dilallo does not own shares of any companies mentioned.  The Motley Fool has no positions in the stocks mentioned above at this time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Young woman sat at laptop by a window

SPY Stock Is Just the Tip of the Iceberg for Canadians Investing in the U.S.

These two BMO ETFs are great alternatives to just buying SPY.

Read more »

TFSA and coins
Stocks for Beginners

How a BIG New TFSA Change Could Affect You in 2024

Canadians are in for a BIG surprise for the TFSA in 2024. Here's how TFSA changes could help you keep…

Read more »

Growing plant shoots on coins
Dividend Stocks

2 Under-the-Radar Dividend Payers With Solid Growth Prospects in 2024

These under the radar monthly dividend payers could provide good growth prospects in 2024 and beyond.

Read more »

Bank Stocks

3 Reasons I’m Buying Royal Bank Stock Today

Royal Bank (TSX:RY) stock has shown signs of strength and yet still put aside $720 million in provisions for loan…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

Growth Stocks: A Once-in-a-Lifetime Opportunity to Get Rich

Here's why investing in quality growth stocks such as Docebo and Datadog may allow you to generate sizeable returns.

Read more »

Question marks in a pile
Dividend Stocks

Should You Buy BMO Stock for its 5.2% Dividend Yield?

BMO stock has outpaced the broader markets in the past two decades. But is this blue-chip TSX bank stock a…

Read more »

Mature financial advisor showing report to young couple for their investment
Bank Stocks

3 Top Financial Stocks to Buy on the TSX Today

The top financial stocks to buy on the TSX today are two small lenders and one Big Bank.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Canopy Growth Corp: Will it Ever Be a Buy?

Canopy Growth Corp (TSX:WEED) keeps going lower. Will it ever find a bottom?

Read more »