While Suncor (TSX:SU) stock has dominated 2024 with a spectacular 30% return compared to Cenovus's (TSX:CVE) negative 1.2% total gain so far this year, the landscape could shift dramatically in 2025. Both integrated Canadian oil giants present compelling energy stock investment cases into the crude value chain, but their trajectories may diverge in interesting ways.

Suncor stock: Setting new records but raising performance bars for 2025

Suncor will enter 2025 riding high on its best operational performance ever. The company achieved a record-breaking refining throughput of 488,000 barrels per day during the third quarter of 2024, with asset utilization reaching an unprecedented 105%. This operational excellence translates directly to the bottom line — every 1% increase in asset utilization adds approximately $20 million to annual free cash flow.

With year-to-date utilization at 98% (up from 88% in 2023) and upstream production surging 20% year over year despite wildfire challenges, Suncor has set an impressively high bar.

However, these achievements create a challenging setup for 2025. Suncor's stellar 2024 performance means it faces tough year-over-year comparisons. Trading at a forward price-to-earnings (P/E) multiple of 11.6 and offering a 4.2% dividend yield, Suncor appears fairly valued, given its market-leading position.

Cenovus stock: Positioned nicely for 2025

Cenovus stock, meanwhile, is positioning itself for a potential breakout year in 2025. The company has completed major turnaround work at its Lima refinery and Lloyd upgrader, addressing historical reliability issues that have hampered performance. These improvements, combined with expected pipeline completions and production optimization initiatives, set the stage for material growth in its oil sands and U.S. refining businesses through 2025 and 2026.

What makes Cenovus particularly attractive is its improving financial resilience. The company can fully fund its dividend and sustaining capital expenditures at West Texas Intermediate (WTI) benchmark oil prices of around US$45 per barrel, with a break-even point somewhere around US$50 WTI, including growth capital expenditures. This provides substantial headroom for shareholder returns, evidenced by its aggressive dividend growth — up 28.6% over the past 12 months compared to Suncor's 4.6% dividend increase.

Trading at a more modest forward P/E of 9.5, Cenovus appears undervalued relative to its growth prospects. While its current 3.4% dividend yield trails Suncor's 4.2%, its rapid dividend growth rate could narrow this gap significantly in the coming years.

Watch out for amplified returns to shareholders

Both companies have reached their respective net debt targets ahead of schedule in 2024 and are committed to returning 100% of excess cash flow to shareholders. However, Cenovus's projected high single-digit earnings growth in 2025 contrasts favourably with analyst expectations of a potential earnings contraction for Suncor following its record 2024.

Market analysts seem to agree with an assessment that an undervalued Cenovus stock may outperform Suncor in 2025 if it successfully sorts out its refineries' reliability rates. While Suncor's average price target suggests a respectable 16% upside, the average analyst price target on Cenovus stock at $31 per share indicates potential gains of 42% over the next 12 months.

Better buy: Cenovus or Suncor stock?

For investors looking for short-term trades for 2025, Cenovus may emerge as the more compelling choice. Its operational improvements, clear growth catalysts, attractive valuation, and aggressive shareholder returns program position it well for short-term outperformance.

That said, Suncor offers a higher dividend yield and remains a solid buy-and-hold candidate as it reduces operating costs while productivity increases. Following a successful turnaround strategy, the company is lowering its already low market-leading oil-price break-even points. Returns to SU stock investors could substantially outperform CVE stock returns over the next decade — unless Cenovus conquers its refinery reliability challenges.

Investor takeaway

Cenovus stock may offer a more attractive risk/reward proposition for 2025, particularly for investors willing to accept a slightly lower current yield in exchange for superior growth potential and possible capital appreciation. However, Suncor stock may still outperform over long-term holding periods.

However, both Canadian energy stocks could do well in a long-term-focused retirement portfolio that aims to generate boatloads of dividends as a source of passive income for decades to come — especially if oil prices comply. Their shareholder-friendly capital-budgeting policies for 2025 and beyond could richly reward loyal investors over the next 10 years and beyond.