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What's in Store for Murphy USA (MUSA) This Earnings Season?

Murphy USA Inc. MUSA is scheduled to release fourth-quarter 2020 results on Wednesday Feb 3, before the opening bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is $2.17 per share and for revenues is $2.96 billion.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the December quarter.

Factors at Play

Murphy USA boasts a unique high-volume low-cost business model, which helps it retain high profitability even in the fiercely competitive retail environment. The company, which sells more than four billion gallons of retail fuel annually, owns more than 90% of its gasoline stations. This allows Murphy USA to keep its operating expenses low. The proximity of the company’s fuel stations to Walmart WMT supercenters enables it to leverage the strong and consistent traffic that these stores attract, thereby driving the above-average fuel sales volume. Further, this is expected to have lent the company’s portfolio a solid competitive edge, a trend that most likely continued in the quarter to be reported.

Murphy USA reported impressive third-quarter 2020 adjusted earnings per share, attributable to a higher year-over-year retail margin, a trend that most likely continued in the fourth quarter. The company projects fourth-quarter 2020 adjusted earnings per share of $2.16, indicating an increase from the year-ago quarter’s reported value of $1.54.

Moreover, its total fuel contribution is likely to have increased 9.7% to $200.8 million from the year-ago quarter’s actuals. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) is estimated to be 19.8 cents per gallon, suggesting an improvement from 17.1 cents reported in the fourth quarter of 2019.

Contribution from Merchandise is expected to rise 9.7% to $115.4 million from the year-ago quarter’s reported level.

Notwithstanding Murphy USA’s stellar September-quarter performance, the coronavirus outbreak and efforts to stop the contagion’s spread are likely to have posed significant challenges to its business.

Importantly, this motor fuel retailer has already been facing lower customer demand since mid-March while store wise average retail fuel volumes on APSM basis are currently trending below the earlier 2020 projection of 250-255 thousand gallons. This, in turn, prompted the El Dorado, AR-based company to lower its retail fuel volumeper site expectation for the fourth quarter. Its retail fuel volume per site is likely to have declined 5.9% to 223.6 million from the year-ago period’s reported number. Further, its retail fuel contribution is expected to have dipped 5.5% to $1,012.7 million from the prior-year period’s actuals.

What Does Our Model Say?

Our proven Zacks model does not conclusively predict an earnings beat for Murphy USA this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Murphy USA has an Earnings ESP of -0.31%.

Zacks Rank: Murphy USA carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, Murphy USA reported 2020 adjusted earnings per share of $2.61, beating the Zacks Consensus Estimate of $2.56 and also increasing from the year-earlier quarter’s bottom line of $2.55. This outperformance is aided by a higher retail margin of 19 cents per gallon, which rose 3.3% year over year.

However, Murphy USA’s operating revenues of $2.8 billion fell 22.4% year over year and also missed the Zacks Consensus Estimate by $147 million due to lower petroleum product sales.

Revenues from petroleum product sales came in at $2.1 billion, down 30.7% from the third quarter of 2019. But merchandise sales at $756.8 million rose 11.1% year over year.

As far as its earnings surprises are concerned, Murphy USA’s bottom line beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 7.71%. This is depicted in the graph below:

Murphy USA Inc. Price and EPS Surprise

Murphy USA Inc. price-eps-surprise | Murphy USA Inc. Quote

Stocks to Consider

While earnings outperformance looks doubtful for Murphy USA this reporting cycle, some firms worth considering from the energy space with the perfect combination of ingredients to deliver a beat this earnings season are as follows:

NuStar Energy L.P. NS has an Earnings ESP of +21.21% and a Zacks Rank #2, currently. The company is scheduled to release earnings on Feb 4.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +17.00% and is a #3 Ranked stock, currently. The firm is scheduled to release earnings on Feb 9.

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