Murphy USA posts second quarter profit of $52 million, revenue up 19%

In the face of pricier fuel heading into the summer driving season, El Dorado-Murphy USA Inc. was still able to post second quarter profits topping $50 million but fell just short of year ago results, the Arkansas company reported at the close of business Wednesday (Aug. 1).

For the period ended June 30, the south Arkansas convenience store operator reported net income of $51.8 million, or $1.58 per diluted share, down 6.7% compared with earnings of $55.5 million, or $1.51 per diluted share, in the same period a year ago. Revenues for the three-month period jumped 19% to nearly $3.82 billion, compared with $3.21 billion in the same period of 2017.

A survey of four Wall Street analysts had expected the Arkansas gasoline station owner known for its locations on Walmart parking lots to see second quarter earnings of $1.19 per share on revenue of $3.55 billion, according to Thomson Reuters.

“Second quarter financial results showed improvement across all major parts of the business,” said President and CEO Andrew Clyde.  “Customer traffic was solid as retail fuel volumes moderated year-over-year declines, (product, supply and wholesale) activities continued to deliver strong results reducing fuel margin volatility, merchandising efforts exhibited robust comps against prior year results, and store-level operations demonstrated further cost saving improvements.”

At the end of 2017, Murphy USA 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, Clyde predicted future headwinds due to regulatory uncertainty in the industry and other business challenges, such as rising fuel prices due to higher crude oil prices.

However, the National Association of Convenience Stores (NACS) recently reported that convenience store retailers cited positive revenue growth over the first six months of 2018, with expanded healthy snack and drink options expected to fuel strong summer sales growth, according to a survey of U.S. convenience store owners.

The industry trade group, which represents the retail side of the convenience store industry, said more than three in four (79%) convenience retailers said in-store sales increased over the first six months of 2018 compared to the same time last year, and more than half (56%) said their fuel sales increased compared to last year. Only 7% of retailers said in-store sales declined and only 19% said fuels sales declined.

Murphy USA reported total fuel contributions fell 6.1% to $180.1 million in the second quarter, compared to $191.9 million a year ago. Total merchandise sales and contributions were $102.8 and $616.1 million, respectively, compared to $97.8 million and $605.7 million in 2017.

Total station and operating expenses were up slightly at $134.8 million, up 4.2% compared to $129.4 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.

During the three-month period, Murphy USA opened six new retail locations and re-opened nine raze-and-rebuilds, bringing the gasoline retailer’s total count to 1,454, consisting of 1,159 Murphy USA sites at mostly Walmart locations and 295 Murphy Express sites. A total of 37 stores are under construction, which includes 17 kiosks undergoing raze-and-rebuild which will return to operation as 1,200-square-foot stores.

In its 2018 guidance, Murphy USA said it plans to build up to 30 new stores and 25 additional raze-and-rebuild locations. That plan is underway, company officials said. The former Murphy Corp. subsidiary, which split off from its El Dorado parent in September 2013, has projected a capital budget of $225 million to $275 million, comparable with the $274 million spent in 2017.

Murphy USA shares (NYSE: MUSA) closed Wednesday up 18 cents at $79.42. The company’s shares have traded in the range of $61.05 and $89.69 during the past 52 weeks. During the quarter, the El Dorado convenience store owner repurchased 1.1 million common shares for approximately $72.7 million at an average price of $68.22 per share.

“We continued to allocate capital in a disciplined manner …, further leveraging the future earnings potential of the business for the benefit of long-term investors,” said Clyde.