Murphy USA Profits Jump 50% On Better Retail Margins

Murphy USA Inc. on Wednesday reported after the close of business that third quarter net income jumped more than 50% as cheaper crude oil prices boosted the El Dorado refiner and retail operator’s retail margins.

For the period ended Sept. 30, Murphy reported income from continuing operations of $62.7 million, or $1.36 per diluted share, compared to earnings of $36 million, or 77 cents per diluted share, a year ago. Net income for the three months was $62.7 million as there were no discontinued operations in the current quarter compared to net income of $41.7 million, or 89 cents per diluted share, in 2013, which included $5.7 million of income from discontinued operations.

Overall, the El Dorado-based retail marketing business that was spun off by Murphy Oil as an independent publicly traded concern reported revenues of $4.68 billion, down slightly from $4.69 billion in the same period a year ago.

Wall Street had expected the Arkansas oil refiner to report third quarter earnings of $1.02 per share on revenue of $4.54 billion, according to a survey of analysts by Thomson Reuters.

Murphy USA officials said the improved results in continuing operations for the current quarter were primarily driven by higher retail margins and volumes along with higher merchandise margin dollars and improved results from its Hereford, Texas ethanol plant, partially offset by lower product supply and wholesale gross margins.

“Solid execution across the board in a favorable fuel margin environment paved the way for exceptional earnings in the third quarter,” said President and CEO Andrew Clyde. “As we celebrated our first anniversary as a standalone company, we continued to deliver on key growth objectives in terms of fuel and merchandising gross margin growth as well as new site development.”

Clyde added that the company’s strong balance sheet and earnings performance year-to-date provided the confidence for the Murphy USA board of directors to announce that the company was buying back $250 million of the oil retailer’s shares. “This program combined with our organic growth pipeline create the foundation for Murphy USA to deliver target shareholder returns,” Clyde said.

Following are additional highlights of Murphy USA’s third quarter report:

• Retail fuel margins averaged 17.5 cents per gallon (cpg), the second highest third quarter margin in five years and retail fuel volumes grew by 2.7% per site.
• Merchandise gross margin dollars grew 5.1% in total compared to the prior year quarter and were up nearly 1.0% on an average per store month (APSM) basis for the current quarter, led by APSM gross margin dollar growth of 3.7% from non-tobacco merchandise.
• Operating income from the Hereford ethanol plant was $6.0 million in Q3 2014 compared to a loss of $0.9 million in the comparable 2013 quarter due to improved operations and favorable crush spread.
• Added 16 stores in the quarter with an additional six sites opened since quarter end; 22 sites are currently under construction of which most will be opened before year end.
• Ended the quarter with a balance of $294.3 million in cash and cash equivalents and subsequent to quarter end announced a $250 million share repurchase program which is expected to be completed by December 31, 2015.

Murphy USA shares (NYSE: MUSA) ended Wednesday’s session at $57.49, down 39 cents. Just over 195,000 shares of the Arkansas public traded stock traded hands, compared to average daily volume of 317,000 shares.