Suncor stock: Analysts see stock climbing above $50 as CEO exits

·3 min read
Suncor Energy's stock fell to its lowest level since late April, during the first trading session since the company announced Mark Little would be leaving the CEO role. REUTERS/Candace Elliott
Suncor Energy's stock fell to its lowest level since late April during the first trading session since the company announced Mark Little would be leaving the CEO role. REUTERS/Candace Elliott

Suncor Energy’s (SU.TO)(SU) stock is expected to shrug off CEO Mark Little’s departure amid mounting concerns about worker safety that have shaken confidence in the company’s management.

That's the view of analysts who see Toronto-listed shares pushing above $50, a level last seen in June, prior to a significant dip in crude oil prices, and the latest death at a company facility. The stock fell 2.43 per cent to $41.40 at 12:51 p.m. ET on Monday, its lowest level since April.

Calgary-based Suncor announced last Friday that Mark Little agreed to leave as president and CEO and resign from the board of directors “effective immediately.” Kris Smith, executive vice president of Suncor’s downstream business, has been named interim CEO.

The shakeup came a day after a worker was killed at Suncor’s Base Plant mine in northern Alberta, adding to a string of safety incidents that drew criticism from U.S. activist hedge fund Elliott Investment Management last spring. There have been 12 other fatalities at Suncor sites since 2014, according to a report from Elliott published in April on its website RestoreSuncor.com.

Raymond James analyst Jeremy McCrea downgraded the company’s stock from “outperform” to “market perform” in a note to clients Monday.

“Until the safety and operational issues are resolved, we recommend that investors look to other Canadian large cap and integrated producers for energy exposure,” he wrote.

However, McCrea maintains a $57 price target for Suncor’s shares, above the stock's current 52-week high. The analyst bumped his expectations to that level in July, after calling for $52 per share in May.

“Suncor has a number of characteristics that make it attractive in a volatile energy market – an unmatched downstream positioning, low decline assets, and natural hedge against wider Canadian heavy differentials being key among them,” he wrote on Monday.

Tudor, Pickering, Holt & Co. analyst Matthew Murphy expects Little’s exit will have minimal impact on Suncor’s efforts to restore faith in its safety culture and operational reliability. He maintains a $51 price target on the stock, down from $59 in June.

Suncor cancels investor update

While Little’s departure is not expected to be a major disruption for Suncor stock, the company canceled an investor update on Monday.

The event, set to take place on Wednesday to address its oilsands operations and safety, was scheduled months ago. The company says the update will be held this fall.

Suncor says it has formed a committee to conduct a global search for Little's successor. McCrea expects the replacement will come from outside the company.

"We don’t underestimate the qualification of internal candidates, but we expect an external CEO will be better positioned to reset the culture at Suncor and help right the operational issues that have gone alongside the safety issues," he wrote.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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