Suncor (TSX:SU) is up 14% previously month. Traders who missed the bounce are questioning if SU inventory remains to be undervalued and good to purchase for a self-directed Tax-Free Financial savings Account (TFSA) or Registered Retirement Financial savings Plan (RRSP) portfolio targeted on dividends and complete returns.
Suncor share value
Suncor trades close to $55.50 on the time of writing. The inventory bounced round between $45 and $58 for a lot of the previous yr, with a number of surges of greater than 10% adopted by subsequent pullbacks of the identical magnitude. Savvy merchants would have made some good cash on this inventory over the past 12 months.
Suncor fell out of favour with traders after the pandemic when the corporate slashed the dividend within the early weeks of the disaster to protect money. The board finally raised the dividend again to its earlier stage, and past, as oil markets recovered. A change of administration on the CEO stage, nevertheless, was nonetheless wanted to draw traders again to the inventory.
Previously two years, Suncor has made good progress on its turnaround plan. The corporate lowered workers, lower working bills, and improved security. The enterprise as a complete has change into extra environment friendly. In truth, Suncor reported file quarterly manufacturing, refining throughput, and retail product gross sales within the first quarter (Q1) 2025.
Suncor’s built-in enterprise construction was the explanation the inventory was once a darling amongst vitality traders. Suncor is understood for its oil sands operations, however it additionally has 4 refineries and operates the Petro-Canada community of retail areas throughout the nation. When oil costs fall, crude enter prices decline for the refinery, which implies it might doubtlessly earn higher margins on the completed product. Gross sales at fuel stations additionally are inclined to do properly when gasoline costs fall, as folks are inclined to take extra journeys and spend extra on different objects within the retailer.
With oil costs beneath stress over the previous yr, and not too long ago turning into unstable once more, Suncor’s companies throughout the total worth chain ought to make it extra secure than the pure-play oil producers.
Suncor earnings
Suncor generated web earnings of $1.69 billion in Q1 2025 in comparison with $1.61 billion in the identical interval final yr. Internet debt dropped to $7.56 billion from $9.55 billion. Now that web debt is under Suncor’s $8 billion goal, the corporate plans to return 100% of extra money to shareholders by means of buybacks.
Suncor already raised the dividend by 5% for 2025 when it introduced the This fall 2024 outcomes earlier within the yr.
Outlook
The latest spike in oil costs is because of geopolitical threats. The danger of a wider battle within the Center East has oil merchants worrying about provide shocks. Iran may doubtlessly shut the Strait of Hormuz, which is a slender waterway between Iran and Oman the place at the very least 20% of the oil provide passes on path to worldwide markets. Analysts have various opinions on how excessive the value of oil would go on this scenario, however a soar to US$100 per barrel, or increased, will not be out of the query.
On the basics aspect, the analyst neighborhood is extra cautious. Provide development in non-OPEC nations, together with the U.S. and Canada, and better output from some OPEC quota cheaters have put the market in a surplus place amid tepid demand from China. Tariffs may push the U.S. financial system right into a recession and deepen the droop in China. The 2 nations are the world’s largest customers of oil, so an financial downturn would put stress on demand. Assuming the geopolitical tensions ease within the coming weeks or months, oil costs may give again their latest features by the tip of the yr.
In Canada, any new pipeline capability that will get constructed within the subsequent few years to provide Canadian producers entry to extra worldwide consumers can be constructive for Suncor.
Time to purchase Suncor?
Close to-term volatility is predicted, however oil bulls ought to preserve Suncor on their radar. The inventory at the moment offers an honest 4% dividend yield, so that you receives a commission properly to trip out some turbulence. Dips can be considered as a possibility so as to add to the place.
