Suncor Energy (SU) +1.3% in Thursday’s trading as Raymond James upgraded shares to Outperform from Market Perform with a C$70 price target, raised from C$61, turning bullish on the stock following what analyst Michael Barth concedes was another impressive quarter.
“We’ve capitulated and changed our tune for the beat-and-raise juggernaut,” Barth wrote, following a slew of near-term and longer-term estimate revisions for the company.
Barth said Suncor’s (SU) valuation looks increasingly compelling, with revised estimates having the shares trading at a greater than 10% sustaining free cash flow yield, the second highest in the company’s peer group, while a double-digit sustaining free cash flow yield on a ~US$60/bbl price deck looks reasonably attractive given high 2P RLI, low and declining sustaining FCF breakevens, and fading concerns around base mine end-of-life.
Upstream momentum continues, Barth said, with Suncor (SU) posting a monster quarter as Oil Sands AFFO came in well above estimates on both stronger than expected production and lower unit operating expense; the company revised FY 2025 upstream production guidance to 845,000-855,000, and unit opex also is trending to come in at-or-below the low end of previous guidance, which the analyst thinks is a function of both specific efficiencies and fixed-cost absorption.
Downstream also racked up a record operational quarter, the analyst said, with refining utilization breaking a record at 106% of nameplate capacity, also with better than expected unit operating expense on the back of higher volume.