It has been about a month since the last earnings report for Murphy USA (MUSA). Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Murphy USA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Murphy USA Q1 Earnings Top, Revenues Miss
Murphy USA reported first-quarter 2019 earnings per share of 16 cents, beating the Zacks Consensus Estimate of 10 cents and the year-ago period adjusted profit of 12 cents. The better-than-expected bottom line could be attributed to robust retail gallons and same-store sales (SSS) volumes, which rose 3.9% and 1.8% year over year, respectively.
Murphy USA’s operating revenues of $3.1 billion decreased 3.9% year over year and missed the Zacks Consensus Estimate by a whisker on lower retail gasoline prices. To be precise, average retail gasoline prices during the quarter were $2.15 per gallon, falling from $2.34 per gallon a year ago.
Revenues from petroleum product sales came in at $2.5 billion, down 5.2% from the first quarter of 2018 but came ahead of the Zacks Consensus Estimate of $2.4 billion. Moreover, merchandise sales, at $606.2 million bettered our estimate of $565 million and rose 6.8% year over year.
The company’s total fuel contribution was up 11.9% year over year to $128.2 million, primarily driven by higher fuel and merchandise contribution dollars and retail gallons. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 12.3 cents per gallon, up from with 11.4 cents per gallon in the first quarter of 2018.
Retail fuel contribution rose 4.5% year over year to $87.6 million despite flat margins (8.4 cents per gallon). Retail gallons were up 3.9% from the year-ago period to 1,041.6 million gallons in the quarter under review. Volumes on a SSS basis rose 1.8% from the first quarter of 2018.
Contribution from Merchandise increased 6.6% to $97.5 million on even as unit margins, at 16.1%, remained flat year over year. On SSS basis, total merchandise contribution was up 4.7% year over year in the quarter under review on the back of higher tobacco and non-tobacco margins that increased 6.8% and 4.8%, respectively.
Fuel gallons rose 2.1% and merchandise sales increased 5% on average per store month (or APSM) basis. Fuel gallons per month rose 1.8% and merchandise sales increased 5.4% on SSS basis.
As of Mar 31, Murphy USA — which opened one new retail location to bringing its store count to 1,473 — had cash and cash equivalents of $180.4 million, and long-term debt (including lease obligations) of $838 million, with a debt-to-capitalization ratio of 51.2%.
During the quarter, the company bought back shares worth $13.3 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -8.35% due to these changes.
At this time, Murphy USA has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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