Murphy USA (MUSA, Financial) is one of the largest independent retailers of gasoline products and convenience store merchandise with more than 1,300 locations in 23 states across the Southern and Midwestern U.S.
Murphy USA serves approximately 2 million customers per day. Its businesses include a network of seven owned terminals that support an advantaged fuel supply allowing the company to source fuel at or below the industry benchmark prices.
In 2015, it added new stores at the fastest pace since 2006, opening 73 new stores including its 1,300th location in Flowood, Mississippi. The company recently reported fourth-quarter results and is poised to grow. It added new stores and has increased total volume and market share for the year.
Fourth-quarter results
- Net income was $66.7 million or $1.58 per diluted share during the fourth quarter of 2015.
- Income from continuing operations was $29.2 million or 69 cents per diluted share.
- Sale of Hereford ethanol plant finalized for $98.2 million, contributing the majority of $37.5 million in income from discontinued operations, or 89 cents per diluted share.
- Retail fuel volume increased by 3.4% for the chain overall at 12.4 cpg margins.
- Merchandise sales increased by 6.7% overall (1.7% APSM) at a 14.3% unit margin led by nontobacco sales and margins, up 9.8% and 8.2%, on an APSM basis.
- The company added 44 new stores in the quarter, bringing the chain total to 1,335 stores at year end.
- Subsequent to quarter end, announced a board-approved strategic allocation of capital to pursue new additional growth opportunities and to undertake a share repurchase program of up to $500 million by Dec. 31, 2017.
- Total network retail gallons sold in the quarter increased by 3.4%.
- Capital expenditures were $53.7 million.
(Source: Company's website)
Expectations for 2016
| Â | Range |
| Capex | To range between 4.2 billion gallons and 4.4 billion gallons per year. |
| SG&A | To range between $130 and $135. |
| Store additions | To be 60 to 80. |
| Adjusted EBITDA (non-GAAP) | $400 to $440. |
| Product Supply & Wholesale annual contribution | To range between $25 million and $45 million. |
Strategy
- Grow organically.
- Diversify merchandise mix.
- Sustain cost leadership position.
- Create advantage from market volatility.
- Invest for the long term.
Positive attributes
- Site selection.
- Network upgrades.
- Fuel market share growth.
- Advantaged product supply.
- Margin capture through volatility.
- Merchandise margin growth.
- Step-level and continuous improvements.
- Cost leadership.
- Scalable systems and processes.
- Tax efficient asset sales.
- Strategic capital allocation.
- Balance sheet flexibility.
On a concluding note
Murphy USA delivered solid performance and executed goals of growing organically, reinvesting in business and effectively utilizing the balance sheet to build long-term value for its shareholders. The company is focused on transforming organizational capabilities from the inside out, providing scalable near-term benefits and establishing a long runway for growth and prosperity.
The company is planning to acquire locations from third parties and target the most attractive and highest-return markets for new store growth while continuing to collaborate with Walmart (WMT, Financial) in enhancing the customer experience at existing Murphy USA locations.
The company is poised for a better future and is expected to create shareholder returns. This company is a buy.
Disclosure: I do not hold any position in the company.
