Murphy USA shares fall almost 9% after modest 4Q earnings report

One year after getting a huge profit boost from the 2017 corporate tax cuts, El Dorado-based Murphy USA Inc. posted more modest results of $78 million after Wednesday’s closing bell to close out the 2018 calendar year.

Those less-than-stellar quarterly financials led to a huge sell-off of Murphy USA shares  (NYSE: MUSA) in Thursday’s session as the Arkansas publicly-traded stock fell more than 10% in intraday trading. The company’s shares closed at $73.52, down $7.05, or 8.75%, as nearly 1.49 million shares traded hands, more than four times the normal volume.

For the period ended Dec. 31, the company reported net income of $77.8 million or $2.38 per share, down 37.6% from $124.8 million, or $3.58 per share, in the same period of 2017. Revenues in the three-month period, however, rose slightly by 3.8% to $3.5 billion, compared to $3.37 billion a year ago.

Wall Street analysts forecasted Murphy USA to report quarterly profits of $2.36 per share on revenue of $3.5 billion. A year ago, the convenience store chain benefitted from net deferred tax liabilities of $88.9 million that were revalued to lower corporate tax rates for future periods after Congress passed the 2017 Tax Cut and Jobs Act, a key plank in President Donald Trump’s economic agenda.

For the full year, net income was $213.6 million, or $6.48 per share, a decline of nearly 13% compared to earnings of $245.3 million, or $6.78 per share, in 2017. Twelve-month revenues rose by $11.8% to $14.3 billion, compared to $12.8 billion in 2017. The yearly results included a net after-tax gain of $35.3 million from settlement of damages incurred in connection with the 2010 Deepwater Horizon oil spill, company officials said.

Despite the dour fourth quarter and year-end report, Murphy USA President and CEO Andrew Clyde said the company finished 2018 strong as fuel margins resulted in an earnings boost before interest expenses and taxes.

“We drove traffic to our stores in the fourth quarter, growing per store volumes and generating the second strongest fourth quarter fuel contribution since our 2013 spinoff. Merchandise capped off an outstanding year, contributing over $400 million of margin in 2018 with line of sight to further improvement in 2019,” said Clyde. “We are in the early stages of executing several transformative initiatives in 2019, including the national launch of our Murphy Drive Rewards loyalty program early in the second quarter, that will help propel the earnings potential of the company in 2020 and beyond.”

Murphy USA’s total fuel contributions rose to $218.9 million in the fourth quarter, compared to $171.9 million a year ago. Total merchandise contributions and sales in the fourth quarter were $102.1 million and $615.3 million, respectively, compared to $97.1 million and $595.6 million in 2017. Merchandise performance grew modestly in the fourth quarter with total merchandise contribution dollars increasing 5.2% at 16.6% margins, driven by growth in the tobacco and non-tobacco categories, company officials said.

The company, which split from Murphy Oil Corp. in August 2013, opened 11 new retail locations in the fourth quarter, in addition to 15 raze-and-rebuild locations. For the full year, the company opened 27 new stores and completed 27 raze-and-rebuilds. That brings the company’s year-end store count to 1,472 locations, consisting of 1,160 Murphy USA sites mostly near Walmart Stores locations and 288 Murphy Express sites.

Murphy USA plans in 2019 to build up to 20 new stores and between 20 to 25 additional raze-and-rebuild locations. The company’s capital budget calls for an outlay of $225 million to $275 million this year, about the same as budgeted in 2018 although the actual amount spent only came in at $194 million.