Murphy USA provides operational update ahead of investor conferences

Murphy USA (MUSA) reported Q2-to-date fuel margins of 31.7 cents per gallon, with a slight increase in total fuel volumes (+0.5%) but a decrease in same-store sales (-1.1%); merchandise sales rose 1.1%. The update follows a Q1 earnings miss (EPS of $2.63 vs. $3.93 expected) and revenue shortfall ($4.53B vs. $4.8B expected), prompting varied analyst reactions including price target cuts from KeyBanc and Stephens, and a downgrade from Raymond James citing concerns over EBITDA growth. Executives will attend the Jefferies and JP Morgan investor conferences later this month.

Analysis

Murphy USA (MUSA) released preliminary Q2 2025 operational data for April-May, revealing a nuanced performance. All-in fuel margins were reported at a robust 31.7 cents per gallon, with retail margins at 29.6 cents, and total fuel volumes saw a slight year-over-year increase of 0.5%. However, this was counterbalanced by a 1.1% decrease in same-store sales volumes, indicating potential pressure on established locations. Total merchandise sales grew 1.1%, but the margin contribution from these sales increased by a more modest 0.3%, with same-store non-nicotine sales declining 0.7% and their associated margins falling 2.5%. This update follows a challenging Q1 2025, where MUSA reported EPS of $2.63, significantly missing the $3.93 forecast, and revenue of $4.53 billion, below the expected $4.8 billion, primarily due to lower retail fuel margins and a 4.2% decline in same-store gallons. In response, KeyBanc and Stephens reduced their price targets to $525 and $475 respectively, though maintaining Overweight ratings, while Raymond James downgraded the stock to Market Perform, citing concerns about core EBITDA growth. Despite these headwinds and a 2.8% increase in average per-store monthly operating expenses, the company is actively pursuing growth through 22 new store constructions and 18 raze-and-rebuild projects. An InvestingPro analysis suggests the company is fairly valued at current levels, adding another dimension to the mixed signals.

Key Decisions for Investors

• Investors should closely monitor disclosures from the upcoming June investor conferences for management's strategies to address the 1.1% Q2-to-date decline in same-store fuel volumes and the 2.5% contraction in non-nicotine merchandise margins, alongside plans to manage the 2.8% rise in operating expenses.
• Given the Q1 earnings miss and subsequent analyst revisions, particular attention should be paid to future reports on same-store merchandise sales and margins, especially in the non-nicotine category, as these are critical for assessing underlying consumer demand and store profitability beyond volatile fuel metrics.
• Consider the company's aggressive expansion (22 new stores, 18 rebuilds) and stated benefits of its EDLP model against the backdrop of recent performance challenges and Raymond James' EBITDA growth concerns before making significant adjustments to MUSA holdings, particularly as InvestingPro indicates current fair valuation.