TD Securities Downgrades Suncor Energy (SU) to Hold

TD Securities downgraded Suncor Energy (NYSE: SU) from Buy to Hold with a price target of C$43 (from C$44). Yesterday Suncor provided 2016 guidance.

"SU today looks a lot more like the original SU, with 2015 forecasted oil sands production accounting for ~81% of total production. This is effectively in line with the oil sands weighting of ~86% before acquiring Petro-Canadaand up significantly from the 50% oil sands weighting shortly after the transaction closed)," said analyst Menno Hulshof. "Although SU de-rated relative to its integrated peers in the years following the acquisition, the multiple gap has largely closed since that time (as we had hoped for)."

The analyst added, "Despite SU's strong structural advantages in this market, downward adjustments to our 2016 estimates have precipitated a drop in our target price to $43.00 from $44.00. With a target return that was below our 20% return threshold even before last night’s announcement, we are compelled to downgrade the stock to HOLD from Buy. We note that this is solely based on: a) relative value (our estimates suggest that it is now the most expensive large-cap on a P/NAV basis), and b) recent share price outperformance — along with Imperial Oil Ltd. (IMO-T), it has posted the highest total return of any large-cap since the beginning of the oil price rout."

For an analyst ratings summary and ratings history on Suncor Energy click here. For more ratings news on Suncor Energy click here.

Shares of Suncor Energy closed at $28.97 yesterday.

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