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Murphy USA (MUSA) Q4 Earnings Meet But Stock Barely Moves

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Zacks Equity Research
·4 min read
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Murphy USA Inc. MUSA stock has hardly moved since its fourth-quarter results announcement on Feb 3. The muted response could be attributed to the company’s mixed performance of in-line earnings but a top-line miss.

What Did Murphy USA’s Earnings Unveil?

The company announced fourth-quarter 2020 adjusted earnings per share of $2.16, same as the Zacks Consensus Estimate and up from the year-earlier quarter’s bottom line of $1.54. The outperformance could be attributed to a higher retail margin of 15.4 cents per gallon, which rose 3.4% year over year.

However, Murphy USA’s operating revenues of $2.9 billion fell 17.3% year over year and missed the Zacks Consensus Estimate by $100 million due to lower petroleum product sales.

Revenues from petroleum product sales came in at $2.1 billion, down 25% from the fourth quarter of 2019. But merchandise sales, at $743.7 million, rose 10.3% year over year.

Murphy USA Inc. Price, Consensus and EPS Surprise

Murphy USA Inc. Price, Consensus and EPS Surprise
Murphy USA Inc. Price, Consensus and EPS Surprise

Murphy USA Inc. price-consensus-eps-surprise-chart | Murphy USA Inc. Quote

Key Takeaways

The company’s total fuel contribution rose 9.7% year over year to $200.8 million driven by margin expansion, partly offset by lower volumes. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 19.8 cents per gallon, improving from 17.1 cents per gallon in the fourth quarter of 2019.

Retail fuel contribution was down 2.5% year over year to $155.5 million although margins increased to 15.4 cents per gallon from 14.9 cents in the corresponding period of 2019. Retail gallons declined 5.5% from the year-ago period to 1 billion in the quarter under review and missed the Zacks Consensus Estimate by 1.9%. Volumes on an SSS basis (or fuel gallons per month) fell 6.7% from the fourth quarter of 2019. Meanwhile, the average retail gasoline price during the quarter was $1.87 per gallon, down significantly from $2.31 per gallon a year ago.

Contribution from Merchandise increased 9.7% to $115.4 million on higher sales even as unit margins, at 15.5%, edged from the year-ago period’s 15.6%. On an SSS basis, total merchandise contribution was up 10.8% year over year in the quarter under review on the back of 14.2% higher tobacco margins. Meanwhile, merchandise sales rose 9.8% on an SSS basis, driven by 10.7% increase in tobacco sales and 7.4% increase in non-tobacco sales.

Fuel gallons were down 5.9% from the prior-year period while merchandise sales increased 9.9% on an average per store month (or APSM) basis.

Balance Sheet

As of Dec 31, Murphy USA — which opened 15 new retail locations and renovated 20 existing stores in the quarter to bring its store count to 1,503 — had cash and cash equivalents of $163.6 million, and long-term debt (including lease obligations) of $951.2 million, with a debt-to-capitalization ratio of 54.8%.

During the quarter, the company bought back shares worth $169.1 million. For the full year, Murphy USA repurchased $399.6 million of its shares.

Guidance

The company projects 2021 fuel volume in a range of 245.5 to 255 thousand gallons on APSM basis. Further, Murphy USA’s 2021 guidance includes up to 55 new stores and up to 25 raze-and-rebuilds, $680-$700 million in merchandise margin contribution, and $325-$375 million in capital expenditures.

Zacks Rank & Stock Picks

Murphy USA carries a Zacks Rank #4 (Sell).

Some better-ranked players in the energy space are PDC Energy PDCE, Royal Dutch Shell RDS.A and Pioneer Natural Resources Company PXD. Each of the companies sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PDC Energy has an expected earnings growth rate of 165.91% for the current year.

Royal Dutch Shell has an expected earnings growth rate of 166.94% for the current year.

Pioneer Natural Resources has an expected earnings growth rate of 331.93% for the current year.

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