Murphy USA sees $39 million net income in the first quarter despite rising fuel prices

Murphy Oil USA Inc. on Wednesday (May 2) flipped to a profit from a year ago as strong in-store merchandise sales and the fuel distribution business led the El Dorado-based gas station operator to another profitable quarter.

For the period ended March 31, Murphy USA reported net income of $39.3 million or $1.16 per share, compared to net loss of $3 million, or eight cents during the same period of 2017. Revenues grew 20% in the first quarter to $2.99 billion, compared to $2.49 billion a year ago.

Wall Street analysts forecasted Murphy USA to report quarterly profits of 26 cents per share on revenue of $3.2 billion, according to Thomson Reuters. This year’s results included a $35 million after-tax gain settlement from the 2010 Deepwater Horizon oil spill, company officials said.

In the fourth quarter of 2017, the Arkansas convenience store owner reported record net income of nearly $125 million, mainly on the strength of a $89 million deferred tax benefit from the 2017 corporate tax reform legislation. At the time, Murphy USA President and CEO Andrew Clyde predicted possible first quarter headwinds due to regulatory uncertainty in the industry and other business challenges, such as rising fuel prices.

“Our fuel business showed resilience in the quarter as March fuel volumes were 99.3% on a same store basis, despite a difficult start to the quarter,” said Clyde. “Our (product supply and wholesale) activities generated 3 cents per gallon for the quarter which led to higher total fuel contribution, offsetting weaker retail margins due to rising prices.  We reduced our fuel break-even requirement by a half-cent per gallon as we continued our commitment towards operating excellence.”

According to the National Association of Convenience Stores (NACS), convenience stores ended 2017 on pace for a 15th straight year of record in-store sales and a 4th straight year of $10 billion-plus in pretax profits. Convenience stores sales overall surged 9.3% to $601.1 billion, led by a 14.9% increase in fuel sales.

Operationally, Murphy USA’s total fuel contributions increased 11.6% to $114.6 million in the first quarter, compared to $102.7 million a year ago. Total merchandise sales and contributions were $91.5 million and $567.7 million, respectively, compared to $88.8 million and $565.8 million in 2017.

Total station and operating expenses were up slightly at $127.4 million, up 2.1% compared to $124.8 million a year ago. The higher gas station operating expenses were largely due to new store additions and slightly higher credit card payment fees tied to rising pump prices.

The convenience store giant said it opened two retail locations in the first quarter, bringing the company’s store count to 1,448 locations, consisting of 1,158 Murphy USA sites and 290 Murphy Express sites. There are 22 stores under construction, including 12 kiosks undergoing a 1,200 square foot raze-and-rebuild construction.

In its 2018 guidance, Murphy USA said it plans to build up to 30 new stores and 25 additional raze-and-rebuild locations. The company’s capital budget calls for an outlay of $225 million to $275 million, about the same as the $274 million spent in 2017.

Murphy USA (NYSE: MUSA) shares closed Wednesday up $1.05 at $64.95. The company’s shares have traded in the range of $61.05 and $89.69 during the past 52 weeks.