BMO keeps Outperform rating on Suncor Energy stock on outlook

Tuesday, Suncor Energy (NYSE:SU) shares retained their Outperform rating and Cdn$65.00 price target from BMO Capital Markets. The $47.79 billion market cap company, currently trading near its 52-week high, has shown exceptional performance with a 14% return over the past year.

According to InvestingPro data, analysts maintain a positive outlook, with multiple upward earnings revisions for the upcoming period. The firm's analysts highlighted Suncor's exceptional performance in the past year, noting the company's operational update which showcased several records in both upstream and downstream operations.

Suncor Energy achieved record quarterly production in the fourth quarter of 2024 and record annual production for the year. With a healthy gross profit margin of 58.3% and strong return on equity of 18%, the company's financial performance matches its operational excellence.

This success was driven by the highest ever quarterly and annual production at its Firebag operations and record annual production at Fort Hills. Moreover, the downstream operations matched the record quarterly throughput seen in the third quarter of 2024, leading to the highest-ever annual throughput.

The analysts at BMO Capital Markets pointed out that Suncor's 2024 was marked by improved reliability, efficient turnarounds, significant production growth, and high facility utilization. Following the operational update, which reported numerous quarterly and annual records for the fourth quarter and the entire year of 2024, the analysts expressed confidence that Suncor could maintain this momentum into 2025.

This could potentially lead to an expansion of the company's valuation multiple relative to its peers. Suncor's operational achievements in 2024 have set a strong foundation for the company's future performance, with BMO Capital Markets affirming their positive outlook on the stock.

In other recent news, Suncor Energy has forecasted an increase in annual production and refining utilization for 2025. The integrated energy company anticipates its annual upstream production to reach between 810,000 and 840,000 barrels per day.

Suncor's capital spending is projected to be in the range of C$6.1 to C$6.3 billion, with 45% allocated to economic investments. Following these projections, Desjardins upgraded Suncor Energy's stock rating from Hold to Buy and increased the price target to C$66.00.

In addition to these developments, Suncor Energy reported a strong third-quarter performance, achieving a 20% year-over-year increase in upstream production and record refining throughput. The company also retired $1.1 billion in principal through a bond repurchase tender, expected to save $70 million annually in interest. Operational enhancements are projected to generate an extra $50 million to $100 million in annual free funds flow.

Desjardins expects Suncor to exceed its $3.3 billion incremental free funds flow target by 2026, with capital expenditures projected to remain under $6 billion through 2026. The recent developments underscore Suncor Energy's commitment to operational efficiency and shareholder value.

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