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Why Is Murphy USA (MUSA) Up 3.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Murphy USA (MUSA - Free Report) . Shares have added about 3.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Murphy USA’s Q2 Earnings and Revenues Top Estimates

Murphy USA announced second-quarter 2021 earnings per share of $4.79, which beat the Zacks Consensus Estimate of $3.39. The outperformance could be attributed to higher retail gasoline price and contribution from the QuickChek acquisition.

However, the company’s bottom line compared unfavorably with the year-earlier quarter's earnings of $5.73 due to a lower retail margin of 28.2 cents per gallon that fell 26.4% year over year.

Meanwhile, Murphy USA’s operating revenues of $4.5 billion soared 87.3% year over year and beat the Zacks Consensus Estimate by $117 million due to improved petroleum product sales.

Revenues from petroleum product sales came in at $3.4 billion, more than doubling from the second quarter of 2020 and 3.18% above the Zacks Consensus Estimate. Merchandise sales, at $963.4 million, rose 25.6% year over year but fell short of the Zacks Consensus Estimate of $975 million.

Key Takeaways

The company’s total fuel contribution fell 2.5% year over year to $316.6 million due to margin contraction, partially offset by higher volumes. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 28.2 cents per gallon, which declined 26.4% from the second quarter of 2020.

Retail fuel contribution was down 9% year over year to $244.7 million as margins decreased to 21.8 cents per gallon from 31.7 cents in the corresponding period of 2020. Retail gallons rose 32.6% from the year-ago period to 1,123.4 million in the quarter under review and beat the Zacks Consensus Estimate by 1.48%. Volumes on an SSS basis (or fuel gallons per month) improved 24.2% from the second quarter of 2020. Meanwhile, the average retail gasoline price during the quarter was $2.73 per gallon, surging from $1.71 per gallon a year ago.

Contribution from Merchandise increased 55.8% to $184.5 million on higher sales and better unit margins, which, at 19.2%, moved up from the year-ago period’s 15.4%. On an SSS basis, total merchandise contribution was up 2.4% year over year in the quarter under review on the back of 2.2% higher tobacco margins. Meanwhile, merchandise sales rose 1.1% on an SSS basis, driven by increase of 3.7% in non-tobacco sales.

Fuel gallons were up 24.5% from the prior-year period while merchandise sales increased 13.1% on an average per store month (or APSM) basis.

Balance Sheet

As of Jun 30, Murphy USA — which opened three new retail locations and closed one in the quarter to take its store count to 1,662 — had cash and cash equivalents of $165 million, and long-term debt (including lease obligations) of $1.8 billion, with a debt-to-capitalization of 70.3%.

During the quarter, the company bought back shares worth $148.3 million.

Guidance

The company projects 2021 fuel volume in a range of 232 to 238 thousand gallons on APSM basis, decreasing from 245-255 before. The downward revision reflects less-than-expected pickup in volumes. Further, Murphy USA’s 2021 guidance includes 34 to 38 new stores and up to 31 raze-and-rebuilds, $690-$700 million in merchandise margin contribution, and $325-$375 million in capital expenditures.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 23.58% due to these changes.

VGM Scores

Currently, Murphy USA has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. 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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