Suncor Energy (SU) is expected to deliver improved operating and financial performance supported by its integrated downstream business and lower cash flow volatility, RBC said in a note Tuesday.

The analysts said the main highlight from their discussions with management was the company's shift in strategy from "value over volume" to "value and volume," which has become a key part of the downstream turnaround at Suncor. This is reflected in a 10% refinery capacity re-rating to 511,000 barrels per day in March.

Suncor Energy's downstream segment plays both an offensive and defensive role within its integrated business. It reduces exposure to Western Canadian Select price spreads, dampens free funds flow volatility, and provides financial diversification, the analysts added.

Looking ahead, refining and marketing pre-tax FFO is estimated at $7.7 billion in 2026 under the base case, or about one-third of total corporate FFO, amid geopolitical uncertainty, including the Iran war, according to the note.

RBC reaffirmed its outperform rating and price target of CA$100 ($72.43) on Suncor.

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