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Murphy USA's (MUSA) Q2 Earnings Miss, Same-Store Sales Grow

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Murphy USA Inc. (MUSA - Free Report) reported second-quarter 2019 earnings per share of $1.01, missing the Zacks Consensus Estimate of $1.16 and the year-ago period adjusted profit of $1.58. The weakness in bottom line could be attributed to lower retail gasoline prices. To be precise, average retail gasoline prices during the quarter were $2.48 per gallon, falling from $2.61 per gallon a year ago.

Murphy USA’s operating revenues of $3.8 billion fell marginally (by 0.7%) year over year but beat the Zacks Consensus Estimate of $3.6 billion on robust retail gallons and same-store sales (SSS) volumes, which rose 5.9% and 3.7% year over year, respectively.

Revenues from petroleum product sales came in at $3.1 billion, down 2% from the second quarter of 2018 and below the Zacks Consensus Estimate of $3.2 billion. However, merchandise sales, at $658.8 million bettered our estimate of $626 million and rose 6.9% year over year.

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 was down 6.9% year over year to $167.7 million, primarily on account of inventory and timing issues related to lower prices. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 14.7 cents per gallon, down from 16.7 cents per gallon in the second quarter of 2018.

Retail fuel contribution rose 8.6% year over year to $152.4 million as margins edged up to 13.4 cents per gallon (from 13 cents in the corresponding period of 2018). Retail gallons were up 5.9% from the year-ago period to 1,140.4 million in the quarter under review. Volumes on an SSS basis (or, fuel gallons per month) rose 3.7% from the second quarter of 2018.

Contribution from Merchandise increased 3.1% to $105.5 million on higher sales and contribution from new stores even as unit margins, at 16%, fell from the year-ago period’s 16.6%. On SSS basis, total merchandise contribution was up 2.9% year over year in the quarter under review on the back of higher tobacco margins that increased 6.6%. Meanwhile, merchandise sales rose 5.7% on SSS basis.

Fuel gallons rose 4.4% and merchandise sales increased 5.3% on average per store month (or APSM) basis.

Balance Sheet

As of Jun 30, Murphy USA — which opened one new retail location to bringing its store count to 1,474   — had cash and cash equivalents of $178.6 million, and long-term debt (including lease obligations) of $833.6 million, with a debt-to-capitalization ratio of 50.5%.

During the quarter, the company bought back shares worth $16.8 million.

Zacks Rank & Key Picks

Murphy USA, which came into existence following the 2013 spin-off of Murphy Oil Corporation’s (MUR - Free Report) downstream business into a separate, independent and publicly-traded entity, holds a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the energy space could look at some better options like Keane Group, Inc. and Dril-Quip, Inc. (DRQ - Free Report) that sport a Zacks Rank #2 (Buy).

Keane Group has a 100% track of outperforming estimates over the last four quarters at an average rate of 320.2%.

The 2019 Zacks Consensus Estimate for Houston, TX-based Dril-Quip is 19 cents, representing some 130.2% earnings per share growth over 2018. Next year’s average forecast is $1.07 pointing to another 463.9% growth.

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