One up, one down
WestJet wraps up a banner year, while Suncor's annual report reveals furthers challenges with its Voyageur upgrader
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at firstname.lastname@example.org
by Max Fawcett
2012 was a year to remember for WestJet (TSE:WJA) and its shareholders. The company capped off a wildly successful year, one that saw record load factors, increased profits and the announcement of a new short-haul airline (and the recognition of CEO Gregg Saretsky as Alberta’s Business Person of the Year) by increasing its quarterly dividend by 25 per cent and authorizing a share buy-back of up to five per cent of the company’s float. Profits on the year were up over 63 per cent on a year-over-year basis (and 70 per cent on a year-over-year basis in the fourth quarter of 2012), jumping to $242.4 million on record revenues of nearly $3.4 billion. The stock closed out the day Wednesday at $22.34 – a 64 per cent increase over where it was trading 12 months ago.
Analysts think 2013 could be even better, both for the company and its shareholders. Walter Spracklin, an analyst with RBC Capital Markets, told the Calgary Herald that the addition of premium economy seating and the introduction of a new tiered pricing structure should both be accretive to the company’s bottom line. “Both the dividend increase and (share buyback) are good indications that management is confident in their ability to generate strong free cash flow growth and should benefit from positive investor sentiment,” he said.
The news was decidedly less rosy for Suncor (TSE:SU), which also released its fourth-quarter and full-year results for 2012 this week. It booked a net loss of $562 million in the quarter (compared with profits of $1.43 billion in Q4 2011) on the back of a $1.49 billion after-tax impairment charge for the uncompleted Voyageur refinery that it inherited from Petro-Canada. A decision on whether the company will proceed with the project is expected by the end of the first quarter, the Calgary Herald reported, but the company didn’t sound optimistic about it. “Suncor’s view is that the economic outlook for the Voyageur upgrader project is challenged. Suncor and its partner continue to work diligently towards determining an outcome for the project,” it said in a press release. “The partners have been considering options for the project, including the implications of cancellation or indefinite deferral.”
Even without the writedown Suncor’s results were underwhelming, with cash flow coming in at $2.24 billion – $400 million less than what it generated in Q4 2011- and earnings of $1 billion. Still, FirstEnergy analyst Michael Dunn remains bullish on the company, sticking a $39 price target on its shares (it’s currently trading at $32 and change) and noting that, despite the negative headline news in its earnings report there was still plenty for the company and its shareholders to look forward to. “Suncor is not only working on brownfield expansions at Firebag and Mackay River, but also moving forward at its Lewis and Meadow Creek leases, and plans to talk more about its in-situ plans after the decision on Voyageur is made in March. It sounds like Suncor has ambitious plans for in-situ growth, regardless of the fate of Voyageur.”