Murphy USA 4Q earnings slide 32%, falls short of analyst estimates

by Wesley Brown ([email protected]) 124 views 

Murphy USA Inc. ended 2015 with declines in quarterly and full-year earnings as the El Dorado publicly-traded concern began taking deliberate steps to free itself from dependence on financial ties to Walmart and former parent, Murphy Oil Corp.

For the period ended Dec. 31, 2015, the El Dorado convenience store operator reported earnings of $66.7 million, or $1.58 per share, down 32% from year-ago earnings of $98.3 million, or $2.13 per share. Fourth quarter revenues also fell well short of year ago sales, declining 19.4% to $2.9 billion, compared to sales of $3.6 billion in the same period of 2014.

Overall, Murphy USA reported net income from continuing operations of $29.2 million, or 69 cents per share. Analysts surveyed had expected the Arkansas gasoline retailer to report fourth quarter earnings of $1.05 cents per share on revenue of $3.24 billion, according to Thomson Reuters.

For the full year, Murphy reported net income of $176.3 million, to $4.02 per share, a decline of nearly 28% from $243.9 million, or $5.26 cents per share a year ago. Yearly revenues fell 26% to $12.6 billion, compared to nearly $17 billion in 2014.

Company President and CEO Andrew Clyde said the company “ended 2015 on an impressive trajectory, achieving our aggressive new store and merchandise growth plans for the year. … (Murphy USA) enters 2016 with strong earnings momentum from our major initiatives along with the clear focus of our independent growth plans and a sustained commitment to delivering value to our shareholders.”

During the quarter, Clyde said Murphy USA opened 44 retail locations, bringing the year end store count to 1,335 locations that include 1,111 Murphy USA sites and 224 Murphy Express sites. A total of 73 stores were opened during the year and one Murphy USA location at a Neighborhood Market location was closed with the real estate sold to a third party, officials said.

Separately, Murphy USA also announced its fifth deal of the quarter, saying it entered into an agreement with an “undisclosed investment-grade buyer” for the sale of the CAM pipeline system off the Gulf Coast for approximately $85 million. The CAM pipeline transports crude oil from the Louisiana Offshore Oil Port (LOOP) to three Gulf Coast refineries, including the Meraux refinery, formerly owned by Murphy Oil Corp.

The deal, expected to close by the end of the first quarter, is part of the Murphy USA’s recently announced strategy to further establish the company’s financial viability and prove to investors and shareholders that the Arkansas gasoline retailer can flourish as a standalone publicly-traded concern.

Just a week ago, Murphy USA confirmed a shift in direction in its Walmart relationship that provides Murphy USA greater flexibility to develop branded gasoline stores independently. With that shift, the board of directors authorized up to $500 million to fund two capital programs through the end of 2017 to pursue new “growth opportunities” not tied to the company’s relationship with the Arkansas retail giant.

The El Dorado gasoline retailer said it will continue to build Murphy Express branded stores at locations acquired from third parties, which achieve similar operational performance metrics as Murphy USA branded locations and represent over 50% of the company’s rapid store growth in the last five years. In addition,the company said it has developed a large store format which will allow for higher impact growth from new locations going forward.

“Since our spin, we have strategically positioned Murphy USA to be a strong independent company that can achieve a high level of organic growth and shareholder returns with or without another large acquisition of store locations from Walmart,” Clyde said on Jan. 25.

The independent stance by Murphy USA also revealed a rift between it and Bentonville-based Wal-Mart Stores as it seeks to establish its own branded gasoline stations near the retailer’s Supercenter locations. Although Murphy USA said it will continue to work with Walmart U.S. on existing Murphy USA locations and future collaborations, it noted in a press release that Walmart will have the ability to develop a proprietary gasoline program on Supercenter locations that are not supplied or committed to be supplied by Murphy USA.

In response to the Murphy USA’s claim, Wal-Mart spokesman Randy Hargrove said the retail giant has had a gasoline program in place for several years and will continue moving forward with that program.

In addition to adjusting its relationship with Walmart, the El Dorado gas retailer and convenience store operator ended all transitional ties with its former parent company, Murphy Oil, at the end of the third quarter. Following the spinoff from the oil giant August 2013, Murphy Oil continued to perform certain corporate functions for Murphy USA on a fee basis in accordance with the Transition Services Agreement that was part of the split. As of Sept. 30, 2015, all services under the Transition Services Agreement have expired. Today’s fourth quarter earnings are the first time the company has released its consolidated financials as an independent company for all periods subsequent to the separation.

Also, the El Dorado gas retailer reached an agreement on Nov. 2 to sell the company’s Hereford, Texas ethanol plant to Green Plains Inc. for a purchase price of $93.8 million. A week earlier Murphy USA Inc. entered into a five-year supply agreement with West Coast retailer marketer Core-Mark to be the primary non-fuel wholesale distributor to the Arkansas company’s retail locations across 23 states.

Going forward, Murphy USA said its plans to add 60 to 80 addition retail stores as a part of its independent growth strategy in 2016. The El Dorado gasoline and convenience store operator said it will spend between $250 million to $300 million on its capital plan in 2016, compared to $216 million in fiscal 2015.

In Wednesday’s trading session, Murphy USA shares (NYSE: MUSA) rose $1.10 to close at $58.63. Murphy USA shares have traded in the range of $47.73 and $73.97 during the past 52 weeks.

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