Critical Survey: Suncor Energy (SU) & Phillips 66 (PSX)

Suncor Energy (NYSE: SU) and Phillips 66 (NYSE:PSX) are both large-cap energy companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Volatility and Risk

Suncor Energy has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500. Comparatively, Phillips 66 has a beta of 1.11, indicating that its stock price is 11% more volatile than the S&P 500.

Valuation and Earnings

This table compares Suncor Energy and Phillips 66’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Suncor Energy $20.20 billion 2.76 $327.75 million $2.13 15.81
Phillips 66 $104.62 billion 0.44 $5.11 billion $3.97 23.32

Phillips 66 has higher revenue and earnings than Suncor Energy. Suncor Energy is trading at a lower price-to-earnings ratio than Phillips 66, indicating that it is currently the more affordable of the two stocks.

Dividends

Suncor Energy pays an annual dividend of $1.01 per share and has a dividend yield of 3.0%. Phillips 66 pays an annual dividend of $2.80 per share and has a dividend yield of 3.0%. Suncor Energy pays out 47.4% of its earnings in the form of a dividend. Phillips 66 pays out 70.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Suncor Energy has raised its dividend for 6 consecutive years.

Institutional and Insider Ownership

65.8% of Suncor Energy shares are owned by institutional investors. Comparatively, 70.2% of Phillips 66 shares are owned by institutional investors. 1.0% of Suncor Energy shares are owned by company insiders. Comparatively, 0.5% of Phillips 66 shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Suncor Energy and Phillips 66’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Suncor Energy 11.63% 5.68% 2.91%
Phillips 66 4.88% 9.52% 4.36%

Analyst Recommendations

This is a summary of current ratings and price targets for Suncor Energy and Phillips 66, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Suncor Energy 0 2 11 1 2.93
Phillips 66 2 7 6 0 2.27

Suncor Energy currently has a consensus price target of $47.13, indicating a potential upside of 39.92%. Phillips 66 has a consensus price target of $102.47, indicating a potential upside of 10.66%. Given Suncor Energy’s stronger consensus rating and higher probable upside, research analysts clearly believe Suncor Energy is more favorable than Phillips 66.

Suncor Energy Company Profile

Suncor Energy Inc is a Canada-based integrated energy company. The Company is focused on developing Canada’s petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production (E&P), and Refining and Marketing. The Company’s Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its E&P segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company’s Refining and Marketing segment is engaged in Refining and Supply, and Marketing operations. In addition, it explores for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. It transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. It markets third-party petroleum products. The Company also conducts energy trading activities.

Phillips 66 Company Profile

Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.

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