Murphy USA first quarter results blow past Wall Street expectations, fuel volume up 4.6%

Shares of Murphy USA jumped nearly 9% in early trading on Monday as the convenience store operator easily beat Wall Street’s first quarter expectations at the kick-off of this week’s opening bell.

For the period ended March 31, 2016, the El Dorado-based company reported net income of $85.9 million, or $2.08 per share, compared to $22.9 million, or 50 cents per share, in the same period a year ago.

First quarter revenues were $2.49 billion, down 14.7% compared to sales of $2.92 billion in the same period of 2015. Wall Street had expected the former Murphy Oil Corp. subsidiary to report first quarter profits of 52 cents on sales of $2.58 billion, according to a survey of analysts by Thomson Reuters.

“First quarter results demonstrate tangible progress on our 2016 initiatives as we executed our formula for value creation,” said Murphy USA President and CEO Andrew Clyde. “Construction for unit growth started the year at a quick pace. The successful transition of our merchandise supply chain contract to Core-Mark in February, provided a material boost to merchandise margins. Per store operating expenses improved almost 2%, even with relatively flat labor costs as we prepared for the store labor initiative rollout.”

Clyde added: “On top of strong organic earnings growth, we completed 30% of our $500 million share repurchase program, further growing our earnings per share and demonstrating our commitment to create sustainable value for our shareholders.”

During the quarter, Murphy USA sold its CAM pipeline system off the Gulf Coast for approximately $85 million to an undisclosed buyer. 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.

That deal 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.

In the fourth quarter, the El Dorado retailer said it planned to alter locating most of its new stores near Walmart parking lots in order to have 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.

Murphy USA said it opened one retail location in the first quarter, bringing the quarter end store count to 1,336, consisting of 1,111 Murphy USA sites and 225 Murphy Express sites. A total of 23 stores are under construction along with nine kiosks now being razed and rebuilt to return to operations as 1,200-square-foot stores by mid-summer 2016.

Following are other key highlights of Murphy USA’s first quarter results.
• Retail fuel volume grew 4.6% for the network overall to 1.007 billion gallons at 11.1 cents per gallon (cpg) margins. Average per store month (APSM) volumes of 252,067 gallons/day declined 0.6% year over year while same store gallons increased 0.2%.

• Product supply and wholesale (PS&W) contribution, including RIN income, was $29.6 million in Q1, or a combined 2.9 cpg on a retail gallon equivalent basis.

• Merchandise contribution dollars grew 16.8% year over year to $85.9 million at record average unit margins of 15.3%.

• Term debt of $200 million issued during the quarter at an effective interest rate of 3.42% with 5% quarterly amortization beginning in Q3 2016.

• Common shares repurchased totaled nearly 2.4 million for $150 million at an average price of roughly $62.50 per share under the previously announced program of up to $500 million.

In Monday’s early trading session, Murphy USA (NYSE: MUSA) shares were up 8.77%, or $5.12 at $63.48. Murphy USA shares have traded in the range of $47.73 and $67.99 during the past 52 weeks.