Suncor Energy About To Go Harvest Mode, Morgan Stanley Upgrades

Morgan Stanley analyst Benny Wong upgraded Suncor Energy Inc. SU from Equal-Weight to Overweight.

The key reason for the upgrade is Suncor’s de-emphasis on acquisitions, allowing the company and analysts to focus on existing projects rather than speculation.

“Without the distraction of transaction speculation, we can focus on Suncor's re-rate potential and anticipate outperformance,” said Wong. The analyst sees the outperformance being driven by three main factors:

1. Excitement leading up to the completion of Suncor’s Fort Hills Project.
2. Free Cash flow reversal and inflection.
3. Growth and net-asset-value that may be revealed through operational synergies and optimizations.

Wong also identified key risks in a negative OPEC announcement on November 30, cost inflation in their Fort Hills project and more deterioration of the environment downstream.