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Why Is Murphy USA (MUSA) Down 0.5% 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 lost about 0.5% 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.

Second-Quarter 2018 Results

Murphy USA reported stronger-than-expected results in the second quarter on higher merchandise margins. As a result, the company’s adjusted net income per share came in at $1.58, surpassing the Zacks Consensus Estimate of $1.21. Further, the bottom line also improved from the year-ago figure of $1.51 per share on the back of higher petroleum product and merchandise sales.

Murphy’s operating revenues of $3,829 million beat the Zacks Consensus Estimate of $3,550 million on higher-than-expected petroleum product sales. Revenues from petroleum product sales came in at $3,193.7 million, surpassing the Zacks Consensus Estimate of $2,881 million. The top line also increased around 19% from the year-ago figure of $3,211.1 million.

Key Tidbits

The company’s total fuel contribution was down 6.1% year over year to $180.1 million amid lower retail fuel contribution, partly offset by solid contribution from Product Supply and Wholesale Business (PS&W).

Retail fuel contribution declined 20.3% year over year to $140.3 million amid lower margins, which decreased 21.7% from the prior-year quarter. The results were partly offset by rise in retail gallons, which increased 1.6% to 1.1 billion gallons in the quarter under review. While total retail gallons sold increased, volumes on a same-store sales (SSS) basis declined 1.5% from the second quarter of 2017.

Contribution from Merchandise set a new record, increasing 4.6% to stand at $102.3 million on higher unit margins, which increased to 16.6% from 16.1% a year ago. On SSS basis, total merchandise contribution was 2% higher in the quarter under review on the back of active promotions and higher tobacco/non-tobacco margins. Tobacco and non-tobacco margins increased 1.9% and 2.2%, respectively.

On an average per store month (or APSM) basis, fuel gallons fell 1.7% and merchandise sales declined 1.6%. On SSS basis, fuel gallons per month declined 1.5% and merchandise sales decreased 1%.

Balance Sheet & Stock Buyback

As of Jun 30, the company had cash and cash equivalents of $71.9 million and long-term debt (including lease obligations) of $850.8 million, with a debt-to-capitalization ratio of 55.4%.

During the quarter under review, Murphy returned $72.7 million of capital to its shareholders. The company repurchased 1.1 million shares at an average price of $68.22 per share.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Murphy USA has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, 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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