Murphy USA Faces Near-Term Headwinds as Raymond James Downgrades to Market Perform

Investors in Murphy USA (MUSA) faced a sobering reality on May 9, 2025, when Raymond James lowered its rating on the gasoline retailer’s stock from Outperform to Market Perform, citing short-term challenges in its Q1 results. The downgrade, paired with broader concerns about the company’s ability to grow core EBITDA, sent shares tumbling to $444.25—a stark contrast to its 52-week high of $561.08. While the stock has since stabilized, the move underscores a critical debate: Is Murphy USA’s stumble a fleeting setback or a sign of deeper operational struggles?

The Catalyst: Q1 Results Underwhelm

Raymond James’ decision stemmed from Murphy USA’s first-quarter earnings, which missed consensus estimates. Revenue fell 6.6% year-over-year to $4.53 billion, while EPS dropped to $2.63, lagging the $3.87 expected by analysts. The downgrade centered on two key issues:
1. Same-store gallons fell 4.2%, driven by adverse weather, calendar shifts (e.g., Leap Day and Easter timing), and storm disruptions.
2. Fuel margins rose only $0.02 per gallon year-over-year, squeezed by an oversupplied market that pressured Product Supply and Wholesale (PS&W) contributions, which declined $16.5 million compared to 2024.

Analysts at Raymond James noted these factors could prolong the path to near-term profitability, particularly with operating expenses rising due to the addition of larger, costlier stores.

Analysts Split on Long-Term Prospects

While Raymond James turned cautious, the broader analyst community remains divided. The average 12-month price target across seven analysts stands at $518.57, implying a 16.78% upside from the post-downgrade price. KeyBanc, for example, lowered its target to $525 from $550 but retained an Overweight rating, citing improving Q2 trends. Meanwhile, GuruFocus estimates a one-year “fair value” of $364, suggesting an 18% downside due to valuation concerns.

Countervailing Strengths: Where Murphy USA Shines

Despite the near-term headwinds, Murphy USA boasts several positives that could support its long-term narrative:
- Non-combustible nicotine sales grew 7% in same-store sales, with margins expanding 15%, signaling a strategic shift toward higher-margin products.
- New stores outperformed the fleet average, delivering 20% more gallons and 40% stronger merchandising margins, hinting at operational efficiency gains.
- Loyalty programs expanded, with membership in Murphy’s Drive Rewards and QuickCheck Rewards rising 11% and 30%, respectively, boosting customer retention.
- Financial flexibility remains robust, with a debt-to-EBITDA ratio of 2.0 after refinancing credit facilities.

The Crossroads: Near-Term vs. Long-Term

The downgrade highlights a critical tension: short-term execution risks versus long-term structural opportunities. Murphy USA’s challenges—weather-related volume drops, an oversupplied fuel market, and margin pressures—are cyclical and temporary. However, its ability to capitalize on secular trends like EV charging infrastructure and convenience store diversification could drive sustainable growth.

For instance, its partnership with EV charging networks, mentioned in the analysis, positions it to capture rising demand for electric vehicles—a market expected to grow at 14% CAGR through 2030. Similarly, its $129 million in Q1 operating cash flow provides a cushion to invest in these initiatives.

Conclusion: A Stock for Patient Investors

Murphy USA’s stumble is a reminder that even well-positioned companies face volatility. While Raymond James’ downgrade underscores valid concerns about near-term EBITDA growth, the stock’s average analyst target of $518.57 reflects optimism about its long-term potential. GuruFocus’s bearish stance, valuing the stock at $364, contrasts with the broader view that Murphy USA’s retail innovations and financial health justify a higher valuation.

Investors weighing the stock should monitor two key metrics:
1. Fuel volumes and margins in Q2, which could signal whether weather-related declines are resolved.
2. Non-combustible nicotine sales growth, which now accounts for $36 million in quarterly sales—a segment with 20% EBITDA margins.

With a market cap of $8.79 billion and a P/E ratio of 18.36, Murphy USA sits at a crossroads. For those willing to look beyond the next quarter, the stock offers compelling upside—if it can execute on its dual mandate of stabilizing fuel operations while capitalizing on high-margin adjacencies.

In short, this is a story of valuation versus value. The near-term downgrade may be justified, but the long-term narrative remains intact—for now.