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Murphy USA (MUSA) Up 0.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Murphy USA (MUSA - Free Report) . Shares have added about 0.1% 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 Misses Q3 Earnings and Sales Estimates

Murphy USA reported weaker-than-expected results in the third quarter of 2018 on lower retail margins. The company’s adjusted net income per share came in at $1.38, lagging the Zacks Consensus Estimate of $1.49. Further, the bottom line deteriorated from the year-ago figure of $1.90 per share. Murphy USA’s operating revenues of $3,788 million lagged the Zacks Consensus Estimate of $3,826 million. However, the top line increased around 17% from the year-ago figure of $3,211.1 million. Revenues from petroleum product sales came in at $3,151.5 million.

Key Takeaways

The company’s total fuel contribution was down 18.2% year over year to $172.7 million. Retail fuel contribution declined 4.7% year over year to $151.4 million amid lower margins, which decreased 8.3% from the prior-year quarter. The results were partly offset by a rise in retail gallons, which increased 3.5% to 1,064 billion gallons in the quarter under review. Along with increased total retail gallons sold, volumes on a same-store sales (SSS) basis also rose 0.9% from the third quarter of 2017.

Contribution from Merchandise increased 7% to stand at $104.5 million on higher unit margins, which increased to 16.8% from 16.1% a year ago. On SSS basis, total merchandise contribution was up 5.6% year over year in the quarter under review on the back of active promotions and higher tobacco/non-tobacco margins. Tobacco and non-tobacco contributions increased 6.7% and 4%, respectively.

Fuel gallons rose 1.3% and merchandise sales increased 0.9% on an average per store month (or APSM) basis. However, fuel gallons per month declined 1.5% and merchandise sales decreased 0.7% on SSS basis.

Balance Sheet

As of Sep 30, Murphy USA had cash and cash equivalents of $75.4 million, and long-term debt (including lease obligations) of $846.6 million, with a debt-to-capitalization ratio of 53.7%.

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 7.38% due to these changes.

VGM Scores

At this time, Murphy USA has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

Estimates have been broadly 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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