Murphy USA (MUSA 0.11%), a low-cost gas station and convenience store chain operator, released first-quarter results on May 1 that did not meet analysts' forecasts. Against an earnings estimate of $4.48 per diluted share, the company declared earnings of just $3.12 per diluted share. Revenue also dipped to $4.84 billion, missing the mark against a $4.89 billion estimate.
| Metric | Q1 2024 | Q1 2024 Analysts Estimate | Q1 2023 | % Change |
|---|---|---|---|---|
| Earnings per share (diluted) | $3.12 | $4.48 | $4.80 | (35%) |
| Revenue | $4.84 billion | $4.89 billion | $5.08 billion | (4.6%) |
| Net income | $66.0 million | N/A | $106.3 million | (37.9%) |
| Total fuel contribution | $286.1 million | N/A | $329.9 million | (13.3%) |
| Merchandise contribution | $191.6 million | N/A | $187.1 million | 2.4% |
Data source: Company results from Murphy USA. Analyst estimates from FactSet.
About Murphy USA
Murphy USA runs a network of 1,733 fuel stations and convenience stores, most of then located adjacent to Walmart stores, providing it with significant traffic flow and a strategic advantage. With its low-cost operating model and a focus on high-volume, low-margin sales, it has been able to remain competitive in a tough market.
The company's business model, focusing on fuel and convenience retailing, has evolved to withstand economic volatility. Despite challenges such as tighter fuel margins and higher operational costs, its merchandise segment has shown promise with a modest increase in contribution dollars.
Q1 in review
One of the key stories of the quarter for Murphy was its tightening fuel margin, which decreased to 24.8 cents per gallon from the prior-year period's 28.9 cents. This significantly impacted the total fuel contributions, despite a slight increase in total retail gallons sold. Such fluctuations could be attributed to market volatility and price pressures.
On a brighter note, the chain's merchandise segment exhibited resilience -- contribution dollars increased by 2.4% to $191.6 million. This growth, despite a marginal decline in unit margins, signifies the company's potential in in-store sales, a crucial aspect of its diversified revenue strategy.
Operational costs also rose, with an increase in store and other operating expenses by $13.8 million (5.8%) year over year. However, Murphy USA demonstrated confidence in its business strategy by continuing with its share repurchase program and increasing its quarterly dividend in March.
The strategic outlook shared by management emphasized the importance of innovation, growth, and productivity initiatives, particularly in the latter half of the year, showcasing an optimistic stance toward the company's long-term viability despite current setbacks.
Looking forward
Despite the challenges it faced in Q1 due to tighter fuel margins, the company remained committed to enhancing its financial profile and shareholder value through disciplined capital expenditures, share repurchases, and dividend payments. The company continues to expand its footprint at a judicious pace, with seven new stores under construction as of the end of Q1, and 18 "raze-and-rebuilds" underway to upgrade older locations.
