Casey's vs. Murphy USA: A Structural Shift in Convenience Store Economics

The convenience store sector is undergoing a fundamental economic shift, and it is the central reason for the contrasting fortunes of Casey's and Murphy USA. The industry's traditional profit engine-fuel-is weakening, while a new value proposition centered on foodservice is rising. This structural divergence forces a re-evaluation of store economics, where the number of fuel transactions is no longer growing, challenging any retailer's reliance on fuel margins.

Industry data shows the core challenge. Overall transactions remain flat, and while total fuel gallons sold saw a slight uptick in 2024 and 2025, the trend for fuel transactions themselves is not expanding. This is driven by lower average fuel prices and improved vehicle efficiency, which cause drivers to make fewer trips to the forecourt. In practical terms, this reduces the opportunity for retailers to attract gas-buying customers into the store for inside merchandise or foodservice purchases. As one industry analyst noted, retailers may need to reconsider their reliance on fuel margins because the number of fuel transactions is not growing. For a chain like Murphy USA, whose model is more heavily weighted toward fuel, this represents a direct headwind to its core profitability.

Against this backdrop, leading operators are pivoting toward a differentiated store experience, with prepared food at the heart. Here, the divergence becomes stark. Casey's has built a powerful competitive moat around its food business. Its pizza segment, in particular, has driven impressive growth, positioning the company as the fifth-largest pizza chain in the U.S. This isn't just a menu item; it's a key growth driver that commands higher margins than the industry average. The company's strategic plan explicitly centers on accelerating this food business, with its entire EBITDA growth target of 8-10% annually split evenly between existing business improvements and unit growth. This focus is supported by a robust loyalty program and a rural footprint that reduces competition, allowing Casey's to capture more value from each in-store transaction.

The bottom line is a sector in transition. The convenience store model is no longer defined by the number of fuel pumps but by the depth of the in-store basket. For investors, the core question is which operator is best positioned to navigate this shift. Casey's, with its food-forward strategy and differentiated store experience, appears to be aligning with the new economic reality. Murphy USA, with a more traditional fuel-centric model, faces the greater challenge of diversifying its revenue streams in a market where the core profit engine is losing its momentum.

Murphy USA: Navigating a Challenging Fuel Environment

Murphy USA's recent financial results illustrate the tension between operational discipline and a deteriorating core business. The company delivered a clean earnings beat in the third quarter, with EPS of $7.25 and revenue just above forecasts. Yet the market's reaction was telling: the stock fell 5.95% in after-hours trading. This disconnect points squarely to the underlying issue-flat year-over-year EBITDA and declining fuel margins that overshadow quarterly execution.

The company's high-volume, low-cost model provides a defensive advantage, but it is being tested. Murphy USA's ownership of over 90% of its fuel stations helps control costs, and its strategic proximity to Walmart supercenters draws in value-focused customers. However, the fundamentals of the fuel business are weakening. All-in fuel margins fell to $0.307 per gallon, a decline of $0.02 from the prior year. More critically, average per-store monthly fuel volumes were down 1.8%. This volume trend, driven by lower prices and improved vehicle efficiency, directly pressures the profit engine that Murphy USA's model is built upon.

Management's response has been to optimize costs and aggressively return capital. The company has tightened its 2025 merchandise contribution guidance and implemented cost-saving initiatives, which helped maintain EBITDA despite margin pressure. The strategic pivot is clear: with growth constrained by the fuel volume headwind, the focus shifts to shareholder returns. This is underscored by the announcement of a $2 billion share repurchase program and a 10% dividend increase. While these moves support the stock price in the near term, they do not address the structural challenge of a shrinking fuel basket.

The bottom line is a company navigating a difficult environment with a resilient but challenged model. Its defensive cost structure and Walmart partnership provide a buffer, but the flat EBITDA and falling fuel volumes signal that the core profitability is under sustained pressure. For Murphy USA, the path forward requires either a significant acceleration in non-fuel revenue growth or a fundamental shift in its store economics to offset the declining role of fuel.

Valuation, Catalysts, and Key Risks

The investment case for these two chains now hinges on contrasting forward paths. Casey's trades at a premium for growth, while Murphy USA's strategy relies on capital returns amid a stagnant core. This divergence is the clearest signal of where the sector's value is being created.

Casey's valuation reflects confidence in its execution. The company's ambitious FY24-FY26 strategic plan targets top-quintile EBITDA growth of 8-10% annually, a pace that justifies its elevated multiple. The plan is concrete, splitting the growth target evenly between existing business improvements and unit expansion. The key catalyst here is the company's ability to consistently hit its targets, particularly in accelerating its food business and growing its store count. With a total enterprise value of around $21 billion and a stock near its 52-week high, the market is paying for a proven model of differentiation and disciplined capital allocation.

Murphy USA's valuation, by contrast, is a function of its defensive resilience and capital return policy. The company's recent $2 billion share repurchase program and 10% dividend hike are direct responses to the lack of organic growth. The catalyst for Murphy USA is not new growth, but the pace of its core challenges. The primary metric to watch is the decline in average per-store monthly fuel volumes. Any acceleration in this trend would pressure its already flat EBITDA, making its capital return strategy the central feature of its investor story for the foreseeable future.

A primary risk for both companies is the strategic shift in consumer behavior. The industry is seeing a move toward more strategic, app-driven shopping, where consumers compare prices in real time before leaving their driveway. This trend amplifies the importance of a compelling in-store value proposition beyond just fuel price. For Casey's, this validates its focus on food and loyalty. For Murphy USA, it increases the vulnerability of its traditional fuel-centric model, as the strategic shopper has more options and less incentive to choose a station based solely on proximity.

The bottom line is a sector bifurcated by execution. Casey's is betting on a future where foodservice and strategic store design drive growth, a bet supported by its current trajectory. Murphy USA is navigating a present where fuel volume is a headwind, and its stock must be supported by capital returns. Investors must monitor the pace of fuel volume decline and Casey's ability to hit its EBITDA targets, as these will determine which narrative ultimately proves correct.