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Murphy USA (MUSA) Shares on a Rally Since Q3 Earnings Beat

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Murphy USA Inc. MUSA stock has surged nearly 11% since its third-quarter earnings announcement on Oct 28. The company’s strong third-quarter earnings and investor optimism, backed by a dividend initiation, a new buyback program and a positive outlook overcoming the coronavirus uncertainty, prompted the rally.

What Did Murphy USA’s Earnings Unveil?

The company reported third-quarter 2020 adjusted earnings per share of $2.61, beating the Zacks Consensus Estimate of $2.56 and increasing from the year-earlier quarter’s bottom line of $2.55. The outperformance could be attributed to a higher retail margin of 19 cents per gallon, which rose 3.3% year over year.

However, Murphy USA’s operating revenues of $2.8 billion fell 22.4% year over year and missed the Zacks Consensus Estimate by $147 million due to lower petroleum product sales.

Revenues from petroleum product sales came in at $2.1 billion, down 30.7% from the third quarter of 2019. But merchandise sales, at $756.8 million, rose 11.1% 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 fell 2.6% year over year to $219.8 million, impacted by volume contraction, partly offset by margin expansion. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 22.3 cents per gallon, improving from 20.1 cents per gallon in the third quarter of 2019.

Retail fuel contribution was down 9.1% year over year to $187.7 million although margins increased to 19 cents per gallon from 18.4 cents in the corresponding period of 2019. Retail gallons declined 11.9% from the year-ago period to 987.3 million in the quarter under review and failed to beat the Zacks Consensus Estimate of 1 billion. Volumes on an SSS basis (or fuel gallons per month) fell 12.7% from the third quarter of 2019. Meanwhile, the average retail gasoline price during the quarter was $1.90 per gallon, down significantly from $2.38 per gallon a year ago.

Contribution from Merchandise increased 6.2% to $118.1 million on higher sales even as unit margins, at 15.6%, fell from the year-ago period’s 16.3%. On an SSS basis, total merchandise contribution was up 6.6% year over year in the quarter under review on the back of 9% higher tobacco margins. Meanwhile, merchandise sales rose 10.5% on an SSS basis.

Fuel gallons were down 12.1% from the prior-year period while merchandise sales increased 10.9% on an average per store month (or APSM) basis.

Balance Sheet

As of Sep 30, Murphy USA — which opened four new retail locations, renovated five existing stores and closed one site in the quarter to bring its store count to 1,488   — had cash and cash equivalents of $317.5 million, and long-term debt (including lease obligations) of $963.2 million, with a debt-to-capitalization ratio of 51.8%.

During the quarter, the company bought back shares worth $90 million.


Murphy USA reiterated its 2020 projections apart from a $10 million increase in its selling and general expenses due to charitable contributions made in the third quarter. Based on the continued recovery in customer traffic over the past few months and Murphy USA’s excellent operating execution, the company expects to achieve adjusted EBITDA of more than $500 million in 2021. The company aims to build up to 50 new larger-format stores annually starting next year and 25 raze-and-rebuilds in 2021. The motor fuel retailer added that it is open to grow inorganically as well.

Murphy USA, which claimed that same-store fuel gallons have recovered to 94% of the year-ago levels, came out with an updated capital allocation strategy along with the earnings release. Murphy USA initiated a cash dividend of 25 cents per share with the first instalment to be paid on Dec 1 and announced a $500 million share repurchase program. The new authorization comes on top of the existing $400 million scheme, which is likely to conclude in 2021.

Zacks Rank & Stock Picks

Murphy USA carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Equinor ASA EQNR, Matador Resources Company MTDR and CrossAmerica Partners LP CAPL that carry a Zacks Rank #2 (Buy).

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

Over 30 days, Equinor has seen the Zacks Consensus Estimate for 2020 surge 37.8%.

Over 30 days, Matador Resources has seen the Zacks Consensus Estimate for 2020 surge 191.7%.

The 2020 Zacks Consensus Estimate for CrossAmerica Partners indicates 464.71% earnings per unit growth over 2019.

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