Stock Analysis & Ideas

Suncor (NYSE:SU) Stock: Rising on Shareholder-Friendly Moves

Story Highlights

Suncor is focusing on enhancing shareholders’ returns through share buybacks and dividend payments. Further, it is streamlining its assets and reducing debt.

Suncor Energy (NYSE:SU)(TSE:SU) is focusing on enhancing shareholders’ returns in the long term, which will act as a catalyst for its stock. The integrated energy company is benefiting from higher commodity prices and is boosting its shareholders’ returns through share repurchase and dividend payments. Also, its focus on reducing debt and streamlining its portfolio augurs well for growth. Suncor’s stock has risen 9% in the past five days.

In the process of optimizing its portfolio further, Suncor announced that it reached an agreement to divest its wind and solar assets to Canadian Utilities (TSE:CU) for C$730 million. 

Speaking about the agreement, Suncor’s CEO, Kris Smith, said that this divestiture would further streamline its portfolio and help the company to concentrate more on core business.

During the last quarter’s conference call, Suncor announced that it agreed to sell its Norway assets for approximately C$400 million. Further, it has started the sales process for its UK North Sea assets. 

In response to these transactions, Smith said, “All of these actions are to improve fit and focus in our portfolio aligned with our strategy.” He added, “We continue to optimize our portfolio to ensure our business is set up to deliver superior long-term returns to our shareholders.”

Is Suncor a Buy or Sell?

Suncor’s initiatives to maximize shareholders’ returns and strengthen its balance sheet will likely support its stock price. Suncor announced during the Q2 conference call that it returned about C$3.2 billion to its shareholders (C$2.6 billion in share buybacks and $657 million in dividends). Year-to-date, Suncor repurchased 88.5 million shares, equivalent to 6.1% of its outstanding shares as of December 31, 2021. 

Suncor is also reducing its debt at an accelerated pace. In 2021, Suncor reduced its net debt by C$3.7 billion to C$16.1 billion. Meanwhile, for 2022, the company expects to reduce its net debt to C$12 billion. 

Suncor stock has a Moderate Buy consensus rating on TipRanks based on five Buy, four Hold, and one Sell recommendations. Meanwhile, analysts’ average price target of $40.09, implies 23.4% upside potential. 

SU stock has positive indicators from insiders, who bought $679.1K shares last quarter. However, during the same period, hedge funds sold 1.7M SU stock.

Suncor stock commands a maximum Smart Score of “Perfect 10” on TipRanks.


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