Murphy USA’s Q1 2025 Results: Mixed Performance Amid Strategic Growth and Cost Pressures

Murphy USA Inc. (NYSE: MUSA), a leading convenience store and gasoline retailer, reported its first-quarter 2025 earnings, revealing a complex picture of resilience and challenges. While the company maintained its focus on growth through store expansion and shareholder returns, declining fuel volumes and rising expenses pressured net income, underscoring the volatility of the retail fuel sector. Below is an in-depth analysis of the results, operational dynamics, and strategic priorities.

Financial Highlights: A Net Income Decline, but Strategic Priorities Hold Steady

• Net Income: Fell to $53.2 million ($2.63 per share) from $66.0 million ($3.12 per share) in Q1 2024. This drop was driven by a $14.0 million increase in store operating expenses, higher depreciation, and interest costs.
• Adjusted EBITDA: Declined $6.9 million to $157.4 million, reflecting margin pressures in fuel and elevated operational costs.
• Revenue: Dipped to $4.53 billion, down from $4.84 billion in Q1 2024, as lower fuel volumes and pricing offset gains in merchandise and margin improvements.

The stock dropped 7.88% post-earnings to $466.35, as investors reacted to the $1.49 per share EPS miss (vs. consensus estimates of $3.93).

Fuel and Merchandise: Contrasting Trends Highlight Operational Challenges

Fuel Performance

Despite a 9.2% rise in retail fuel margins to 23.7 cents per gallon (cpg), total fuel contribution grew only 0.4% year-over-year to $287.3 million, due to a 1.9% decline in retail fuel volume. Same-store fuel gallons fell 4.2%, attributed to Easter holiday timing shifts, Leap Day impacts, and severe weather disruptions.

The PS&W (Premium, Sundry, & Other) segment, which includes RINs credits, saw a $16.5 million year-over-year decline to $1.7 cpg, as market volatility and timing issues reduced contributions.

Merchandise Growth

Merchandise contribution rose 2.3% to $195.9 million, supported by margin expansion to 19.6% (from 19.2% in 2024). Both nicotine and non-nicotine categories grew modestly on a same-store basis (2.8% and 1.9%, respectively), though total merchandise sales dipped slightly to $999.4 million.

Operational and Capital Allocation Priorities

Store Expansion

• Net Store Growth: Added 8 new-to-industry (NTI) locations, netting 4 stores after closures, bringing the total to 1,761 stores.
• Construction Pipeline: 31 stores under development, including 14 NTI and 17 raze-and-rebuild projects, signal long-term growth ambitions.

Debt and Liquidity

• Refinancing: Secured a $750 million revolving credit facility (maturing 2030) and a $600 million Term Loan B (maturing 2032), extending debt maturities and boosting liquidity.
• Share Repurchases: Spent $151.2 million to repurchase 321,100 shares, leaving $787.8 million remaining under its $1.5 billion buyback authorization.
• Dividends: Raised the quarterly dividend to $0.50 per share (2% increase), totaling $9.8 million in Q1.

Cost Management

• SG&A Expenses: Dropped $2.0 million to $60.1 million, benefiting from lower professional fees and employee costs.
• Tax Rate: Fell to 14.1% (vs. 19.4% in 2024), aided by federal energy tax credits and share-based compensation benefits.

Forward-Looking Outlook: Navigating Volatility and Growth Risks

CEO Andrew Clyde emphasized “supply margin normalization in H2 2025” as a key driver for fuel profitability. However, risks remain:
1. Volume Declines: Same-store fuel gallons are sensitive to macroeconomic factors and consumer shifts toward cheaper alternatives.
2. Execution Risks: The planned 31 store openings require overcoming labor and supply chain challenges.
3. Price Environment: Lower fuel prices could suppress consumer spending on merchandise, though margin discipline may offset this.

The company remains bullish on its “value-driven retail strategy”, prioritizing store productivity, food-and-beverage expansion, and loyalty programs to drive merchandise sales.

Conclusion: A Resilient Business, but Challenges Loom

Murphy USA’s Q1 2025 results reflect a mixed performance, with margin improvements in fuel and merchandise offset by volume declines and rising costs. The company’s focus on debt refinancing, shareholder returns ($912 million allocated to buybacks and dividends in 2024), and strategic store growth positions it to weather near-term headwinds. However, risks such as volatile fuel markets and execution on expansion plans remain critical.

Investors should note the 7.88% post-earnings stock drop as a reaction to EPS and revenue misses, but also consider the strong balance sheet (with $49.4 million cash and extended debt maturities). If fuel margins stabilize and store growth delivers on expectations, Murphy USA could rebound in 2025. For now, the stock’s $466 price trades at a 16.2x forward P/E ratio, offering moderate valuation upside if the company can recapture net income growth.

In sum, Murphy USA remains a recession-resistant play in the convenience retail sector, but its success hinges on executing its cost-discipline and expansion strategies amid a challenging macroeconomic backdrop.