Murphy USA (MUSA) Up 4.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Murphy USA (MUSA). Shares have added about 4.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Murphy USA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Murphy USA’s Q4 Earnings Beat Estimate
Murphy USA announced fourth-quarter 2023 earnings per share of $7, which beat the Zacks Consensus Estimate of $6.31 and came ahead of the year-ago profit of $5.21. The outperformance primarily reflects higher fuel margins and robust merchandise sales.
However, Murphy USA’s operating revenues of $5.1 billion fell 5.5% year over year and missed the consensus mark by $291 million due to a fall in the retail gasoline price.
Merchandise sales, at $1 billion, rose 2.9% year over year and came in line with our estimate. Revenues from petroleum product sales came in at $4 billion, below our estimate of $4.4 billion and down 7.2% from the fourth quarter of 2022.
Key Takeaways
MUSA’s total fuel contribution rose 6.4% year over year to $393 million due to margin expansion. Moreover, total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 32.5 cents per gallon, 6.2% higher than the fourth quarter of 2022.
Retail fuel contribution increased 10.2% year over year to $376 million as margins widened to 31.1 cents per gallon from 28.3 cents in the corresponding period of 2022. Retail gallons edged up 0.2% from the year-ago period to 1,208.4 million in the quarter under review but missed our estimate by 2%. Volumes on an SSS basis (or fuel gallons per store) declined 1.5% from the fourth quarter of 2022 to 237.9 thousand. Meanwhile, the average retail gasoline price during the quarter came in at $2.97 per gallon, down from $3.19 per gallon a year ago.
Contribution from Merchandise increased 4.6% to $197.7 million on higher sales and a rise in unit margins from 19.1% a year ago to 19.4% in the fourth quarter of 2023. On an SSS basis, total merchandise contribution was up 3.2% year over year, primarily on the back of 7.1% higher tobacco margins. Meanwhile, merchandise sales increased 1.4% on an SSS basis, again due to an increase in tobacco sales.
The company’s monthly fuel gallons were down 1.4% from the prior-year period, though merchandise sales increased 1.8% on an average per store monthly basis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Balance Sheet
As of Dec 31, Murphy USA — which opened 10 new retail locations in the quarter to take its store count to 1,733 — had cash and cash equivalents of $117.8 million and long-term debt (including lease obligations) of $1.8 billion, with a debt-to-capitalization of 68.3%.
During the quarter, MUSA bought back shares worth $162 million.
Guidance
The company projects 2024 fuel volume in the range of 240-245 thousand gallons on an APSM basis. Further, Murphy USA’s 2024 guidance includes 30-35 new stores and 35-40 raze-and-rebuilds, $860-$880 million in merchandise margin contribution, and $400-$450 million in capital expenditures.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -10.37% due to these changes.
VGM Scores
At this time, Murphy USA has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Murphy USA has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Murphy USA belongs to the Zacks Oil and Gas - Refining and Marketing industry. Another stock from the same industry, Marathon Petroleum (MPC), has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Marathon Petroleum reported revenues of $36.82 billion in the last reported quarter, representing a year-over-year change of -8.2%. EPS of $3.98 for the same period compares with $6.65 a year ago.
Marathon Petroleum is expected to post earnings of $1.85 per share for the current quarter, representing a year-over-year change of -69.6%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Marathon Petroleum. Also, the stock has a VGM Score of A.
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