Murphy (MUSA) Hits 52-Week High: Is There More Opportunity?

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Murphy USA MUSA, a leading independent retailer of motor fuel and convenience merchandise in the United States, continues its uptrend. The stock closed the session on Jul 19 at $511.11 after setting a new 52-week high of $512.38 earlier on that day. As shown in this chart, with the advance, MUSA shares are up more than 43% since the start of the year, handily outperforming the industry, sector and the S&P 500.

YTD Performance

Zacks Investment Research
Zacks Investment Research


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Given this impressive year-to-date performance, can investors still consider buying MUSA stock, or should you book profits? Let’s delve deeper into the company’s fundamentals.

5 Reasons to Like Murphy USA

Strong Business Model: Murphy USA’s unique high-volume low-cost business model helps it retain high profitability even in the fiercely competitive retail environment. The company, which sells more than 4 billion gallons of retail fuel annually, owns more than 90% of its gasoline stations. This allows Murphy USA to keep its operating expenses low. The proximity of Murphy USA’s fuel stations to Walmart supercenters helps the company to leverage the strong and consistent traffic that these stores attract, thereby driving above-average fuel sales volume.

Expansion and Growth Initiatives: Murphy USA’s strategic expansion is on a strong trajectory with the opening of three new stores in Q1 2024 and plans to open 30-35 new stores by the year-end. The construction activity includes 22 raze-and-rebuild projects and nine new-to-industry stores, ensuring a significant increase in operational capacity. The company’s robust pipeline of new store openings, the highest since the COVID-19 outbreak, positions it for accelerated growth into 2025, enhancing long-term revenue and EBITDA growth.

Financial Performance and Outlook: Murphy USA's financial performance has been impressive, with a 2023 operating income of $842 million and EBITDA of $1 billion. For 2024, the company guides an EBITDA range of $1-$1.2 billion, reinforcing its strong financial health. The company's ability to generate substantial free cash flow, estimated at around $500 million for 2024, and its plan to maintain competitive fuel prices and invest in reduced-risk products are the key drivers of sustained profitability and stock price appreciation.

Acquisition Synergies: Murphy USA's purchase of QuickChek Corporation, a family-owned food and beverage chain, has enhanced the company's offerings. QuickChek's well-established presence in densely populated areas, such as the New Jersey/New York region, has positively impacted Murphy USA's merchandise revenues and margins.

Robust Capital Return Program: Murphy USA's capital return strategy is highly favorable for shareholders. The company targets the repurchase of approximately 1 million shares annually, alongside its increasing dividend program. Notably, the Q2 2024 dividend of 44 cents marked a 4.7% increase over sequentially and a 15.7% increase over the year-ago period. This commitment to returning capital to shareholders through buybacks and dividends enhances investor confidence and can positively impact the stock price.

While Murphy USA has strong long-term potential, the current market conditions and specific challenges facing the company cannot be ignored.