Should Murphy USA Investors Load Up on the Stock or Wait?

The retail sector is highly competitive, with companies constantly trying to capture customer loyalty. Murphy USA MUSA, part of the Zacks Retail - Convenience Stores industry, has set itself apart through a high-volume, low-cost operating model. This approach helps it stay profitable even when margins are tight. A major strength lies in its ownership of over 90% of its fuel stations, which helps keep operating costs low — a key advantage in a low-margin business.Fueling Success Through Walmart PartnershipOne of Murphy USA’s biggest advantages is its proximity to Walmart WMT supercenters. These high-traffic locations naturally draw customers to Murphy USA for fuel and quick purchases. Many locations even offer fuel discounts through Walmart programs, deepening the relationship. Although Walmart began building its own gas stations in 2016, Murphy USA quickly adapted by acquiring nearby land independently. This shift gave the company more control over location selection and allowed it to focus on high-performing sites.Beyond Fuel: Building a Broader Retail ExperienceMurphy USA isn’t just focused on gas. Its fuel sourcing system allows it to offer competitive prices, drawing in value-focused consumers. The acquisition of QuickChek has further expanded its convenience store offerings, improving product variety and boosting non-fuel revenues. QuickChek’s strong presence in urban areas and its updated rewards app—featuring mobile ordering and fuel incentives—are helping drive additional customer engagement and transactions.Supporting Shareholders Through BuybacksThe company has also taken aggressive steps to reward its shareholders. Since 2014, Murphy USA has significantly reduced its outstanding share count through buybacks, leading to solid growth in earnings per share. These buybacks have helped support the stock and appeal to investors looking for capital appreciation rather than income.Challenges to ConsiderHowever, not everything is rosy. Murphy USA carries a large amount of debt, which can be risky during periods of commodity price swings. Rising costs—especially labor and maintenance—are also pressuring margins. In today’s inflationary environment, managing expenses carefully will be critical to protecting profits.Valuation and Market PositionMurphy USA’s stock currently trades above its five-year historical average on a forward price/earnings basis. Although it looks more affordable than rival Casey’s General Stores CASY, the premium suggests that much of the expected growth is already baked into the price. That could make the stock vulnerable to negative news or earnings misses. Image Source: Zacks Investment ResearchAdditionally, its dividend yield is under 1% (like Casey’s General Stores), which may not satisfy investors seeking income in today’s market. Image Source: Zacks Investment ResearchThe stock has also lagged behind this year, down 7.3%, while Casey’s General Stores is up over 5%. Merchandise sales have been softer than expected in some areas, raising questions about future revenue growth. Image Source: Zacks Investment ResearchBottom Line: Balanced but WatchfulMurphy USA offers strong operational efficiency, a valuable Walmart connection and an expanding convenience store footprint. But investors should also weigh the company’s debt load, rising costs, and modest merchandise sales growth. Compared to Casey’s General Stores, Murphy USA’s recent performance has been weaker, and with the stock already pricing in much of its growth, the upside may be limited. For now, a Zacks Rank #3 (Hold) seems fair. You can see the complete list of today’s Zacks #1 Rank stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Walmart Inc. (WMT): Free Stock Analysis Report Murphy USA Inc. (MUSA): Free Stock Analysis Report Casey's General Stores, Inc. (CASY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks