Suncor Energy (TSX:SU) has been one of the best-performing large-cap Canadian energy stocks over the last year. In that period, the stock has risen 24%, or 28% on a total return basis, easily outperforming the S&P/TSX Energy sub-index, which gained about 17% in the same period.
What was responsible for Suncor’s excellent performance this past year?
By and large, it’s down to sound management by the company.
The oil and gas industry didn’t exactly excel as a whole over the last year. As mentioned previously, the TSX energy sub-index gained just 17%, far behind the TSX as a whole, while oil prices more or less flatlined over the period. Suncor’s stellar results were an exception rather than the rule.
This raises an important question: can Suncor keep the good results coming? If it can, then its stock may be a good value today. In the ensuing paragraphs, I will explore Suncor’s recent earnings releases to determine the factors that drove the stock’s 2025 outperformance and whether they can recur in the future.
Recent earnings results
Suncor Energy’s recent earnings results have been pretty good, with the company having beaten the bottom-line earnings per share (EPS) estimate in three out of the last four quarters. The headline numbers from the most recent quarterly release were as follows:
- $1.6 billion in net earnings.
- $1.79 billion in adjusted operating earnings.
- $3.78 billion in cash from operations.
- $1.34 worth of EPS.
The figures above were actually mostly down on a year-over-year basis, but they were mostly up on a quarter-over-quarter basis. For example, the $1.34 in EPS was up 44% from the second-quarter (Q2) figure of $0.93. More importantly, the reported results were ahead of what analysts had anticipated for the company, leading to considerable appreciation in Suncor’s stock price.
Looking to the future
Having explored Suncor’s recent earnings, it’s time to answer the all-important question:
Can the company continue beating earnings expectations in the future?
There are two ways of approaching this question: the short-term approach and the long-term approach.
The short-term approach — estimating where earnings are likely to fall in the next few quarters — argues for a “yes.” Oil prices are currently on the rise, so if Suncor does everything the same as it did in Q3, its Q1 report is likely to show considerable growth. The Q4 release is harder to forecast — the trend in oil prices was not great in Q4 — but the next few earnings releases from Suncor should broadly be satisfactory.
The long-term approach also argues that Suncor will continue performing. We can reasonably ascertain Suncor’s future prospects from management’s approach and from Suncor’s organizational structure.
Suncor’s management has a fiscally disciplined approach, as evidenced by its behaviour in 2022. That year, when oil prices were rallying, Suncor’s management elected to pay down debt rather than spend the windfall profits on special dividends or risky bets. That was wise.
Second, Suncor’s overall structure lends itself to healthy profits. Suncor is not just an exploration and production (E&P) company; it’s also involved in refining, natural gas, and gas stations. These varying, diversified operations give Suncor the ability to thrive in many different oil and gas market conditions. For example, Suncor’s refineries, which make money off the “crack spread,” can profit even when oil prices are fairly low. This characteristic contributes to Suncor’s generally solid earnings results, and I’d expect it to persist into the future.
On the whole, I expect good things from Suncor Energy in the next five years.
