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7 Reasons Why Murphy USA (MUSA) Stock Has More Room to Run

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A discreet investment decision entails buying healthy stocks at the opportune time while getting rid of those that are prone to risk. Price upsurge and strong fundamentals substantiate a stock’s bull run.

Shares of Murphy USA Inc. MUSA are likely to exhibit an uptrend on the back of solid first-quarter earnings performance and robust retail margins.

As a matter of fact, if you still haven’t capitalized on this stock’s positives, it’s time that you invest in it for portfolio boost.

What Makes It a Promising Pick?

An Outperformer

A glance at the company’s price trend shows that the stock had an impressive show on the bourse in the past 12 months. Shares of Murphy USA have surged 30.4% against the 40.2% decline of its industry.


Top Rank & Attractive VGM Score 

This leading independent retailer of motor fuel and convenience merchandise in the United States currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research suggests that stocks with a VGM Score of A or B when combined with a Zacks Rank of 1 or 2 offer the best investment opportunities. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Excellent Q1 Performance

Murphy USA reported first-quarter 2020 earnings per share of $2.92, beating the Zacks Consensus Estimate of $2.8 and also significantly improving from the year-earlier quarter’s bottom line of 16 cents. This outperformance could be attributed to a sturdy retail margin of 26.9 cents per gallon, which soared 220% year over year and also outpaced the Zacks Consensus Estimate of 9.7 cents.

Northward Estimate Revisions

The direction of estimate revisions serves as a key indicator when it comes to stock movement. The Zacks Consensus Estimate for 2020 earnings has been revised 21.05% upward over the past 60 days while the same for 2021 has moved 0.31% north.

Positive Earnings Surprise History

Murphy USA has a decent surprise record. Its earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters and missed the same on one occasion, the average beat being 16.61%.

Strong Balance Sheet

The company exited the first quarter with cash and cash equivalents of $200.3 million, up 11.03% from the year-ago level.

During the quarter, the company bought back shares worth $140.6 million.

Key Drivers

Murphy USA’s unique high-volume low-cost business model helps it retain high profitability despite a fiercely competitive retail environment. The company, which sells more than 4 billion gallons of retail fuel annually, owns above 90% of its gasoline stations. This enables it to contain its operating expenses. The proximity of Murphy USA’s fuel stations to Walmart WMT supercenters aids the company to gain traction from the consistent footfall that these stores attract, thereby driving its above-average fuel sales volume.

The company’s outsourcing of raw materials is another key catalyst. With access to pipelines and product distribution terminals, Murphy USA is able to avail of fuel at a cheaper cost than most can buy. This, in turn, allows the company to sell retail gasoline at a discount.

Through its shareholder-friendly capital allocations, Murphy USA is committed to return a portion of its free cash flow to its shareholders through continued and ongoing share repurchases. As a proof, the company spent 48% of its capital budget from 2015 to 2019 on stock buybacks.

Notwithstanding Murphy USA’s outstanding first-quarter performance, the coronavirus outbreak and efforts to stop the contagion’s spread are likely to pose significant challenges to the business. In fact, the motor fuel retailer is already facing lower customer demand since mid-March. Besides, store wise average retail fuel volumes on APSM basis are currently trending below the earlier 2020 projection of 250-255 thousand gallons, which prompted this El Dorado, AR-based company to withdraw its retail fuel volume expectation for this year. But Murphy USA is still maintaining its guidance for organic growth, fuel break-even, corporate costs and capital spending.

Other Key Picks

Some other top-ranked stocks in the energy space are Chevron Corporation CVX and Diamondback Energy, Inc. FANG, each carrying the same Zacks Rank as Murphy USA at present.

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Chevron Corporation (CVX) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
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