Here's Why It is Worth Betting on Murphy USA (MUSA) Now
Murphy USA's (MUSA) unique high-volume, affordable business model aids in sustaining strong profitability levels despite operating on a severely competitive retail landscape.
A discreet investment decision leads to buying healthy stocks at the opportune time while getting rid of those that are prone to risk. Price upsurge and strong fundamentals substantiate a stock’s bull run.
Shares of Murphy USA Inc. MUSA are likely to exhibit an uptrend on the back of a solid operational performance and robust retail margins.
Therefore, if you are still contemplating on leveraging this stock price rally, it’s time that you tap the investment opportunity at your disposal. Let’s weigh the factors why Murphy USA has enough momentum to carry on with.
What Makes It a Promising Pick?
A glance at the company’s price trend shows that the stock had an impressive show on the bourses in the past 3 months. Shares of Murphy USA have rallied 20.5% compared with the industry’s 8.3% growth.
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Top Rank & Attractive VGM Score
This leading independent retailer of motor fuel and convenience merchandise in the United States currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research suggests that stocks with a VGM Score of A or B when combined with a Zacks Rank of 1 or 2 offer the best investment opportunities. Thus, the company appears a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Excellent Q2 Performance
Murphy USA reported second-quarter 2021 earnings per share of $4.79, which beat the Zacks Consensus Estimate of $3.39. The outperformance could be attributed to higher retail gasoline price and contribution from the QuickChek acquisition.
Northward Estimate Revisions
The direction of estimate revisions serves as a key indicator when it comes to stock movement. The Zacks Consensus Estimate for 2021 earnings has been revised 11.7% upward over the past 60 days while the same for 2022 has moved 6.9% north.
Positive Earnings Surprise History
Murphy USA has an encouraging surprise record. Its earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters, meeting the same on one occasion, the average beat being 18.66%.
Strong Balance Sheet
The company exited the second quarter with cash and cash equivalents of $165 million.
Murphy USA’s unique high-volume and low-cost business model helps it retain solid profitability despite a fiercely competitive retail environment. The company, which sells more than 4 billion gallons of retail fuel, annually, owns above 90% of its gasoline stations. This enables it to contain its operating expenses. The proximity of Murphy USA’s fuel stations to Walmart WMT supercenters aids the company to gain traction from the steady flow of traffic that these stores attract, thus driving its above-average fuel sales volume.
The company’s outsourcing of raw materials is another key catalyst. With its access to pipelines and product distribution terminals, Murphy USA is able to avail of fuel at a cheaper cost than most can buy. This, in turn, allows the company to sell retail gasoline at a discount.
Through its shareholder-friendly capital allocations, Murphy USA is committed to return a portion of its free cash flow to its shareholders through continued and ongoing share repurchases. As evidence, the company spent 48% of its capital budget from 2015 to 2019 on stock buybacks.
The company has been building up to 50 larger-format stores, annually, since the start of this year as well as 25 raze-and-rebuilds. In the last reported quarter, Murphy USA’s 2021 guidance included 34-38 new stores and up to 31 raze-and-rebuilds. The motor fuel retailer added that it is open to grow inorganically as well.
Management believes that the company’s strong operational performance and positive trends will allow its stock to achieve a sustainable EBITDA of more than $500 million in 2021, two years earlier than expected.
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