Suncor surges as RBC upgrades on safety improvement

Jan 7, 2023

Suncor Energy

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Suncor Energy (NYSE:SU ) leads a rally in Canadian energy stocks, +8.3% as RBC Capital upgraded shares to Outperform from Sector Perform with a C$53 price target, raised from C$47, largely on the company's improved safety performance.

RBC's Greg Pardy said Suncor (SU) has reached "a favorable inflection point as it relates to improving its operating reliability and safety [which] will take time and there are bound to be bumps in the road along the way, but the direction of travel is clearer to us now," and the stock's market value now "holds the potential to appreciate on a relative basis."

The analyst said RBC's recent meetings with the company "left us encouraged that the company has a tighter grip on the steps required to regain its status as a best-in-class oil sands operator."

Among other Canadian energy stocks sporting strong gains on a big day for the oil and gas sector: (PDS) +11.2%, (VET) +8.8%, (OVV) +7.8%, (CVE) +5.5%, (CNQ) +4.8%, (TRP) +3.4%, (ENB) +2.4%.

Suncor (SU) is priced at ~6x free cash flow, which is "far from expensive for a business that could possibly increase its dividend to ~10% yield," Michael Wiggins De Oliveira writes in a bullish analysis published on Seeking Alpha.

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