Suncor Energy (TSE:SU) Stock: A Powerful Play with Bright Prospects
Stock Analysis & Ideas

Suncor Energy (TSE:SU) Stock: A Powerful Play with Bright Prospects

Story Highlights

Suncor Energy holds potential as it is making efforts to grow in traditional as well as renewable energy markets. The company’s decision to sell off assets in order to focus on optimizing its asset portfolio should bode well for the stock.

Canadian energy company Suncor Energy (TSE:SU)(NYSE:SU) has delighted investors with an impressive performance so far in 2022. The company has been benefiting from solid utilization, improving crude oil and refined product realizations along with increased upstream output and refinery throughput. According to TipRanks data, Wall Street analysts and financial bloggers are upbeat about the stock’s upside potential.

With a market cap of C$41.98 billion, this integrated energy company is engaged in operations that include oil sands development, production, and upgrading, offshore oil and gas, petroleum refining along with its national Petro‑Canada retail distribution network. Suncor also owns a network of fast-charging EV stations, called Electric Highway, in Canada.

Suncor has been having a wild run on the stock exchanges. Its shares have returned 78% in the past year. Despite the bull run, let’s decode why Suncor stock still has room for more upside movement.

Multiple Growth Catalysts Are in Play for Suncor

The energy company’s inorganic growth strategies are doing well. It is on track to witness $100 million of annual gross synergies for the Syncrude joint venture owners this year. Suncor expects to realize an additional $200 million of annual gross synergies through 2023-2024.

The company has also been divesting some assets to optimize its asset portfolio. In this regard, Suncor has signed a deal for the sale of its Exploration and Production (E&P) assets in Norway, for gross proceeds of roughly C$410 million. It is also expected to close another deal to sell its wind and solar assets by early 2023.

Suncor has raised its ownership to nearly 39% in the White Rose assets. Furthermore, the company expects production activities from the West White Rose Project to begin in the first half of 2026. This will deliver long-term value for the company by extending the White Rose field’s production life.

Suncor has also undertaken several other initiatives to enhance its incremental free cash flows. In this regard, the company expects to achieve an additional incremental free cash flow of about $400 million by the end of 2022.

Notably, the energy company managed to capture substantial benchmark crack spreads and refining margins in the second quarter of 2022 under Refining and Marketing. In fact, its refineries exited the last reported quarter with an average refinery utilization of over 100%. The company expects the trend to continue for the rest of this year.

Is Suncor Energy a Buy or Sell?

Suncor Energy stock appears to be a decent option to invest money in. According to TipRanks, the Street is cautiously optimistic about SU stock and has a Moderate Buy consensus rating based on five Buys, four Holds, and one Sell.

Further, TipRanks data shows that financial bloggers are 97% Bullish on SU stock, compared to the sector average of 71%.

Concluding Thoughts

Suncor’s dividend per common share and the repurchase rate of common shares during the second quarter came in at record levels. The company’s impressive dividend yield of 3.9% surpasses the sector average of 3.09%. Furthermore, SU stock’s average price forecast of C$56.39 implies a 36.3% upside potential to current levels.

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