Group 1 - Murphy USA's shares have declined by 15% over the past year due to concerns regarding consumer spending at its convenience stores [1] - The company has been a disappointing performer in the market, reflecting broader economic challenges [1] Group 2 - The analysis indicates a contrarian investment approach based on macroeconomic views and stock-specific turnaround stories [1]

Core Insights - Murphy USA Inc. reported first-quarter 2025 earnings per share of $2.63, missing the Zacks Consensus Estimate of $3.87 and down from $3.12 in the previous year, primarily due to lower petroleum product sales [1] - The company's operating revenues were $4.5 billion, a decrease of 6.6% year over year, and fell short of the consensus estimate by $241 million [1] Revenue Breakdown - Revenues from petroleum product sales were $3.5 billion, below the estimate of $3.7 billion and down 8.4% from Q1 2024 [2] - Merchandise sales remained unchanged year over year at $999.4 million [2] Fuel Contribution - Total fuel contribution increased by 0.4% year over year to $287.3 million, driven by higher retail contribution and margin expansion, with total fuel contribution at 25.4 cents per gallon, up 2.4% from Q1 2024 [3] - Retail fuel contribution rose 7.1% year over year to $267.7 million, with margins widening to 23.7 cents per gallon from 21.7 cents in the same period of 2024 [4] - Retail gallons sold decreased by 1.9% year over year to 1,131.2 million, missing the estimate of 1,152 million [4] Merchandise Contribution - Contribution from merchandise increased by 2.2% to $195.9 million, despite flat sales, as unit margins rose from 19.2% a year ago to 19.6% [5] - On a same-store sales (SSS) basis, total merchandise contribution increased by 1% year over year, mainly due to a 2.8% rise in nicotine margins, although total merchandise sales decreased by 1.6% on an SSS basis [5] Balance Sheet and Share Buyback - As of March 31, Murphy USA had cash and cash equivalents of $49.4 million and long-term debt of $2 billion, with a debt-to-capitalization ratio of 73.3% [7] - The company repurchased shares worth $151.2 million during the quarter [7]

Financial Performance - For Q1 2025, the company reported net income of $53.2 million, or $2.63 per diluted share, on revenue of $4.5 billion, compared to net income of $66.0 million, or $3.12 per diluted share, on revenue of $4.8 billion in Q1 2024[155]. - Revenues for Q1 2025 decreased by $0.3 billion, or 6.6%, primarily due to a 6.0% decline in retail fuel sales prices and a decrease in fuel sales volumes[156]. - Net income in Q1 2025 decreased by $6.4 million to $79.1 million compared to Q1 2024, primarily due to higher store operating expenses and depreciation[170]. - EBITDA for Q1 2025 was $155.6 million, down from $164.3 million in Q1 2024, reflecting the decrease in net income and increased depreciation[178]. Fuel and Merchandise Sales - Total fuel contribution was 25.4 cents per gallon in Q1 2025, up from 24.8 cents per gallon in Q1 2024, while retail fuel volumes decreased by 1.9%[146]. - Total fuel contribution for Q1 2025 was $287.3 million, an increase of $1.2 million or 0.4% from Q1 2024, driven by higher retail fuel contribution despite lower fuel volumes sold[171]. - Total merchandise sales were approximately $999.4 million in Q1 2025, a decrease of $1.3 million compared to Q1 2024, while total merchandise contribution improved by 2.2%[172]. - Retail fuel margins increased by 9.2% to 23.7 cents per gallon in Q1 2025 compared to 21.7 cents per gallon in Q1 2024[171]. Operating Expenses - Store and other operating expenses increased by $14.0 million, or 5.6%, in Q1 2025, primarily due to higher employee-related expenses and maintenance costs[157]. - SG&A expenses in Q1 2025 were $2.0 million lower than in Q1 2024, mainly due to reduced professional fees and employee-related costs[174]. Capital Expenditures and Financing - The company anticipates total capital expenditures for the full year 2025 to range from approximately $450 million to $500 million, primarily funded through operating cash flow[149]. - Cash required by investing activities increased to $87.7 million in Q1 2025 from $74.9 million in Q1 2024, primarily due to higher capital expenditures[183]. - Financing activities in Q1 2025 required cash of $38.4 million, a decrease of $83.8 million from $122.2 million in Q1 2024, with share repurchases increasing to $150.0 million from $86.4 million[184]. Debt and Interest Rates - As of March 31, 2025, total long-term debt was $1,974.2 million, up from $1,832.7 million at December 31, 2024[188]. - The company has a senior secured term loan of $600 million and a revolving credit facility of $750 million as part of its credit agreement[194]. - The effective interest rate for the term loan was 6.21% as of March 31, 2025, down from 6.44% at December 31, 2024[188]. - A 10% increase or decrease in interest rates would have an immaterial impact on the company's financial statements as of March 31, 2025[209]. Dividends - Cash dividend payments increased to $0.49 per share totaling $9.8 million in Q1 2025, up from $0.42 per share totaling $8.8 million in Q1 2024, with a targeted double-digit growth in dividends over time[185]. - The Board of Directors declared a quarterly cash dividend of $0.50 per share, annualized to $2.00, payable on June 2, 2025[186]. Market Risks and Hedging - The company is exposed to market risks related to the volatility in the price of refined products, which can affect revenues and operating costs[207]. - As of March 31, 2025, the company had short-term commodity derivative contracts in place to hedge the purchase price of refined products, with a 10% change in benchmark prices being immaterial to the company[208]. - The company utilizes limited interest rate swaps to hedge a portion of its exposure to interest rate fluctuations[209]. - The acquisition of interest rate derivatives is managed by senior management with delegated authority from the Board level committee[209].

Financial Data and Key Metrics Changes - The first quarter results reflect a same-store gallon decline of 4.2%, impacted by temporal factors such as the non-repeating leap year and storms, accounting for almost half of the decline [10][11] - Retail margins were $0.02 per gallon higher in the first quarter compared to the prior year, with margins not compressed during the normal cycle of rising prices [12][13] - Cash flow from operations was $129 million in Q1, with total cash capital expenditure of $88 million, resulting in free cash flow of $41 million [26] Business Line Data and Key Metrics Changes - In the nicotine category, same-store sales for non-combustible products were up over 7% for the quarter, while total nicotine contribution margin increased by 2.8% on a same-store basis [17] - Merchandise sales were negatively impacted by a 30 basis point headwind due to the absence of a $1 billion jackpot from the previous year [15] - Sales in the candy category were up 15% year-over-year, indicating strong performance in certain center store categories [15][18] Market Data and Key Metrics Changes - The retail price of fuel averaged between $2.75 and $2.80 per gallon, significantly lower than previous years, affecting customer behavior and loyalty [11][12] - The company noted an increase in middle to high-income customers, now representing almost half of the loyalty program membership base, indicating a shift in consumer demographics [21][42] Company Strategy and Development Direction - The company is focused on enhancing store productivity and growth through new store openings, raze and rebuilds, and remodeling activities [31] - The strategy includes targeted promotions and loyalty programs to drive customer engagement and sales, particularly in the food and beverage categories [18][19] - The company plans for supply margins to normalize in the second half of 2025, anticipating a return to a more balanced supply-demand environment [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model, stating it is inflation-proof and recession-resistant, with a focus on value-oriented customers [6][28] - The management highlighted that they are not pulling back on second-half guidance due to tariffs or supply chain uncertainties, indicating a stable outlook [30] - The company is optimistic about the impact of return-to-office mandates and sensible fuel economy regulations on long-term fuel demand [12] Other Important Information - The company added eight new stores in Q1, with ongoing construction of 18 new stores and 20 raze and rebuilds [24] - The effective income tax rate for Q1 was 14.1%, lower than the previous year's rate, due to recognition of energy tax credits [26] Q&A Session Summary Question: Trends in inside sales - Management noted that non-nicotine categories showed improvement due to digital pricing and promotional effectiveness, with expectations for better performance in Q2 due to Easter [33][34] Question: Update on retail margins - Retail margins in April were $0.28 per gallon, with the marginal retailer facing similar cost headwinds, indicating a structural advantage for the company [36][37] Question: Growth in middle and high-income customers - The increase in higher-income customers is attributed to a broader recognition of value, with similar purchasing behavior across income cohorts [40][42] Question: Traffic trends and consumer behavior - Traffic was impacted by weather-related store closures, but management is focused on maintaining competitive pricing to drive traffic [59][60] Question: Store build pace - The company expects to remain second-half weighted for store openings this year, with plans for a more even pace in the following year [64] Question: Operating expenses and staffing - The company is seeing a record number of applications for staff positions, which is positively impacting wage rates and overtime costs [74][75]

Financial Data and Key Metrics Changes - The first quarter results reflected a same store gallon decline of 4.2%, impacted by temporal factors such as the non-repeating leap year and storms, accounting for almost half of the decline [8][10] - Retail margins were $0.02 per gallon higher in Q1 compared to the prior year, with retail margins in the Northeast Region up about $0.45 [10][11] - Cash flow from operations was $129 million in Q1, with total cash capital expenditure of $88 million, resulting in free cash flow of $41 million [24] Business Line Data and Key Metrics Changes - Inside store sales were impacted by a 30 basis point headwind due to the absence of a $1 billion jackpot from the previous year, but candy sales were up 15% year-on-year [13][15] - The nicotine category saw a total nicotine contribution margin increase of 2.8% on a same store basis in Q1, with non-combustible nicotine products up over 7% [15][16] - Food and beverage sales at QuickChek were up nearly 1% in the quarter, driven by menu innovation and targeted promotions [16] Market Data and Key Metrics Changes - The company noted a shift in customer demographics, with growth in middle to high-income customers now representing almost half of the loyalty program membership base [19] - The loyalty programs, Murphy Drive Rewards and QuickChek Rewards, saw membership growth of 1130% in Q1, indicating a shift towards value-seeking behavior among consumers [18][19] Company Strategy and Development Direction - The company is focused on enhancing store productivity and growth through new store openings, raze and rebuilds, and remodeling activities [28] - The capital structure was strengthened with an increase in the revolving credit facility from $350 million to $750 million, allowing for greater flexibility in executing long-term strategies [23] - The company plans for supply margins to normalize in the second half of 2025, anticipating a return to a more balanced supply-demand environment [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model, stating it is inflation-proof and recession-resistant, with a focus on value-oriented customers [5][28] - The company does not foresee pulling back on second-half guidance due to tariffs or supply chain uncertainties, indicating a stable outlook [27] - Management highlighted that the hard data shows a resilient customer base, with lower-income consumers still spending on non-discretionary products [20] Other Important Information - The effective income tax rate for Q1 was 14.1%, lower than the previous year's 19.4%, due to energy tax credits and share-based compensation benefits [24] - The company added eight new stores in Q1, with ongoing construction of 18 new stores and 20 raze and rebuilds [22] Q&A Session Summary Question: Trends in Inside Sales - Management noted that non-nicotine categories showed improvement due to digital pricing and promotional effectiveness, while nicotine sales were impacted by a lighter promotional cycle in Q1 [32] Question: Update on Retail Margins - Retail margins in April were $0.28 per gallon, with the marginal retailer facing similar cost headwinds, indicating a structural increase in margins [34] Question: Growth in Middle and High-Income Customers - The increase in higher-income customers is attributed to a broader recognition of the need for value, with similar purchasing behavior across income cohorts [40] Question: In-Store Sales Momentum - QuickChek's food and beverage sales momentum is expected to continue, with promotional intensity remaining competitive throughout the year [44] Question: Operating Expenses and Store Performance - The company is seeing a record number of applications for staff positions, which is positively impacting operating expenses and store performance [72]

Core Insights - Murphy USA reported a revenue of $4.53 billion for the quarter ended March 2025, which is a decrease of 6.6% compared to the same period last year [1] - The earnings per share (EPS) for the quarter was $2.63, down from $3.12 in the previous year [1] - The reported revenue fell short of the Zacks Consensus Estimate of $4.77 billion, resulting in a surprise of -5.05% [1] - The company experienced an EPS surprise of -32.04%, with the consensus EPS estimate being $3.87 [1] Financial Performance Metrics - Total fuel contribution was 25.4 cents per gallon, below the average estimate of 28.68 cents from three analysts [4] - Retail fuel volume for the chain was 1,131.2 million gallons, compared to the average estimate of 1,151.95 million gallons [4] - Retail fuel margin was reported at 23.7 cents per gallon, lower than the average estimate of 25.82 cents [4] - Operating revenues from petroleum product sales were $3.49 billion, which is an 8.5% year-over-year decline and below the average estimate of $3.67 billion [4] - Merchandise sales generated $999.40 million, slightly below the average estimate of $1.03 billion, representing a year-over-year change of -0.1% [4] - Other operating revenues were reported at $36.20 million, compared to the average estimate of $40.75 million, reflecting a year-over-year increase of 15.7% [4] Stock Performance - Murphy USA's shares have returned +8% over the past month, while the Zacks S&P 500 composite increased by +10.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Viewpoint - Murphy USA reported quarterly earnings of $2.63 per share, missing the Zacks Consensus Estimate of $3.87 per share, representing a -32.04% earnings surprise [1] - The company posted revenues of $4.53 billion for the quarter, missing the Zacks Consensus Estimate by 5.05% and down from $4.84 billion a year ago [2] Group 1: Earnings Performance - The earnings for the previous year were $3.12 per share, indicating a decline in earnings year-over-year [1] - Over the last four quarters, the company has surpassed consensus EPS estimates three times [2] Group 2: Revenue Performance - The company has not been able to beat consensus revenue estimates over the last four quarters [2] - The current consensus EPS estimate for the coming quarter is $7.39 on $5.42 billion in revenues, and for the current fiscal year, it is $25.61 on $20.77 billion in revenues [7] Group 3: Market Performance - Murphy USA shares have added about 0.2% since the beginning of the year, while the S&P 500 has declined by -4.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Group 4: Industry Outlook - The Retail - Convenience Stores industry is currently in the top 39% of Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

[Key Highlights & Management Commentary](index=1&type=section&id=Key%20Highlights) Q1 2025 performance was solid despite timing headwinds, driven by fuel margin growth and merchandise share gains - CEO Andrew Clyde noted that despite a **2% comparison headwind** from the timing of Leap Day and Easter, the business performed admirably, with key strengths in share gains for nicotine and center-of-store categories[5](index=5&type=chunk) - The company repurchased **321.1 thousand common shares for $151.2 million** and paid a quarterly dividend of **$0.49 per share**, a 2.1% increase from the previous quarter[6](index=6&type=chunk) - Subsequent to quarter end, on April 7, 2025, the company **refinanced and upsized its revolving credit facility and Term Loan B** to extend maturities and increase liquidity[6](index=6&type=chunk)[13](index=13&type=chunk) Q1 2025 Key Financial and Operational Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $53.2 million | $66.0 million | -19.4% | | Diluted EPS | $2.63 | $3.12 | -15.7% | | Total Fuel Contribution | 25.4 cpg | 24.8 cpg | +0.6 cpg | | Total Retail Gallons | -1.9% | N/A | -1.9% YoY | | SSS Retail Gallons | -4.2% | N/A | -4.2% YoY | | Merchandise Contribution | $195.9 million | $191.6 million | +2.3% | [Consolidated Results](index=2&type=section&id=Consolidated%20Results) Net income and Adjusted EBITDA declined year-over-year due to rising operating expenses that offset revenue gains - The decrease in net income was a result of **higher store operating expenses, depreciation, and interest expense**, which outweighed the positive impact of higher fuel and merchandise contributions and lower G&A expenses[7](index=7&type=chunk) Consolidated Financial Summary (Q1 2025 vs Q1 2024) | Metric ($ Millions, except EPS) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $53.2 | $66.0 | | Earnings per share (diluted) | $2.63 | $3.12 | | Adjusted EBITDA | $157.4 | $164.3 | [Segment Performance](index=2&type=section&id=Segment%20Performance) The company saw mixed segment results with higher merchandise contribution and stable fuel contribution despite volume declines [Fuel](index=2&type=section&id=Fuel) Higher retail fuel margins drove a 7.1% increase in retail contribution, offsetting lower volumes and weaker wholesale results - Retail fuel contribution dollars **increased by $17.7 million (+7.1%)** compared to Q1 2024, primarily due to higher retail fuel margins[8](index=8&type=chunk) - Product Supply & Wholesale (PS&W) contribution, including RINs, **decreased by $16.5 million** compared to Q1 2024, attributed to timing and pricing impacts from market conditions[8](index=8&type=chunk) Fuel Segment Key Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total fuel contribution ($ Millions) | $287.3 | $286.1 | | Retail fuel contribution ($ Millions) | $267.7 | $250.0 | | Retail fuel volume (Million gal) | 1,131.2 | 1,153.1 | | Retail fuel margin (cpg) | 23.7 | 21.7 | | Total fuel contribution (cpg) | 25.4 | 24.8 | [Merchandise](index=3&type=section&id=Merchandise) Merchandise contribution grew 2.3% to $195.9 million, driven by improved unit margins and growth in all categories - Total nicotine contribution dollars **increased 2.8%** and non-nicotine contribution dollars **increased 1.9%** compared to Q1 2024[9](index=9&type=chunk) Merchandise Segment Key Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total merchandise contribution ($ Millions) | $195.9 | $191.6 | | Total merchandise sales ($ Millions) | $999.4 | $1,000.7 | | Merchandise unit margin (%) | 19.6% | 19.2% | | Total merchandise contribution ($K SSS) | $38.4 | $37.8 | [Operating Expenses](index=3&type=section&id=Other%20Areas) Store operating expenses rose due to employee and maintenance costs, while SG&A expenses decreased on lower professional fees - Store OPEX, excluding payment fees and rent on an APSM basis, **rose 5.7%** versus Q1 2024, mainly due to increased employee expenses and maintenance costs[10](index=10&type=chunk) - The decrease in SG&A costs was primarily due to **lower professional fees and employee-related costs**[10](index=10&type=chunk) Expense Summary (Q1 2025 vs Q1 2024) | Expense Category ($ Millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total store and other operating expenses | $266.1 | $252.1 | | Total SG&A cost | $60.1 | $62.1 | [Store Portfolio Update](index=4&type=section&id=Store%20Openings) The company expanded its network with a net increase of 4 stores, reaching a total of 1,761 locations - At the end of Q1 2025, the company had a total of **1,761 stores**[11](index=11&type=chunk) - There were **31 total stores under construction** at the end of the quarter, comprising 14 new-to-industry sites and 17 raze-and-rebuilds[11](index=11&type=chunk) Q1 2025 Store Activity | Activity | Murphy USA / Express | QuickChek | Total | | :--- | :--- | :--- | :--- | | New-to-industry (NTI) | 8 | — | 8 | | Closed | (2) | (2) | (4) | | **Net change** | **6** | **(2)** | **4** | [Financial Position and Capital Allocation](index=4&type=section&id=Financial%20Resources) The company maintained a solid financial position while executing its capital allocation plan of share repurchases and dividends - In Q1 2025, the company repurchased **321.1 thousand shares for $151.2 million**, with approximately **$787.8 million remaining** under the current share repurchase authorization[14](index=14&type=chunk) - A quarterly dividend of **$0.49 per share** was paid in March 2025, and a subsequent dividend of **$0.50 per share** was announced for June 2025, a 2% increase[6](index=6&type=chunk)[15](index=15&type=chunk) - Subsequent to quarter end, the company **increased its revolving credit facility to $750 million** and its **Term Loan B to $600 million**, extending maturities to 2030 and 2032, respectively[13](index=13&type=chunk) Key Financial Position Metrics (as of March 31, 2025) | Metric ($ Millions) | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $49.4 | $56.7 | | Long-term debt | $1,974.2 | $1,783.1 | [Financial Statements](index=7&type=section&id=Financial%20Statements) The statements detail a year-over-year decline in revenue and net income, alongside shifts in assets and liabilities [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Q1 2025 revenue and net income decreased to $4.53 billion and $53.2 million respectively, due to lower sales Q1 Income Statement Highlights ($ Millions, except per share data) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total operating revenues | $4,525.4 | $4,843.7 | | Income from operations | $88.0 | $105.2 | | Income before income taxes | $61.9 | $81.9 | | Net Income | $53.2 | $66.0 | | Diluted Earnings Per Share | $2.63 | $3.12 | [Consolidated Balance Sheets](index=10&type=section&id=Consolidated%20Balance%20Sheets) Total assets stood at $4.50 billion, while stockholders' equity declined to $719.6 million due to share repurchases Balance Sheet Summary ($ Millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $716.4 | $748.1 | | Total assets | $4,502.5 | $4,541.6 | | Total current liabilities | $891.8 | $947.9 | | Total liabilities | $3,782.9 | $3,701.5 | | Total stockholders' equity | $719.6 | $840.1 | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company generated $128.5 million in operating cash flow, funding investments and shareholder returns Q1 Cash Flow Summary ($ Millions) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $128.5 | $136.0 | | Net cash required by investing activities | $(87.7) | $(74.9) | | Net cash required by financing activities | $(38.4) | $(122.2) | | **Net increase (decrease) in cash** | **$2.4** | **$(61.1)** | [Non-GAAP Financial Measures](index=12&type=section&id=Supplemental%20Disclosure%20Regarding%20Non-GAAP%20Financial%20Information) Adjusted EBITDA, a key non-GAAP metric, was $157.4 million, used by management to assess core operating performance - The company uses **Adjusted EBITDA** for operational and financial decision-making, as it believes the measure is a more reliable indicator of ongoing operating performance and the ability to generate cash flow from operations[33](index=33&type=chunk) Reconciliation of Net Income to Adjusted EBITDA ($ Millions) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $53.2 | $66.0 | | Income tax expense | $8.7 | $15.9 | | Interest expense, net | $25.5 | $23.7 | | Depreciation and amortization | $68.2 | $58.7 | | **EBITDA** | **$155.6** | **$164.3** | | Other adjustments | $1.8 | $(0.0) | | **Adjusted EBITDA** | **$157.4** | **$164.3** |

Core Insights - Murphy USA (MUSA) distinguishes itself in the competitive retail sector through a high-volume, low-cost operating model, maintaining profitability despite tight margins [1] - The company's ownership of over 90% of its fuel stations is a significant strength, contributing to low operating costs [1] Group 1: Strategic Advantages - Proximity to Walmart supercenters enhances customer traffic, with many locations offering fuel discounts through Walmart programs [2] - The acquisition of QuickChek has expanded Murphy USA's convenience store offerings, improving product variety and boosting non-fuel revenues [3] Group 2: Shareholder Value - Since 2014, Murphy USA has reduced its outstanding share count through aggressive buybacks, leading to growth in earnings per share [4] Group 3: Challenges - The company carries a large amount of debt, which poses risks during commodity price fluctuations, and rising costs are pressuring margins [5] - Merchandise sales growth has been softer than expected, raising concerns about future revenue growth [12] Group 4: Valuation and Market Position - Murphy USA's stock trades above its five-year historical average on a forward price/earnings basis, indicating that much of the expected growth is already reflected in the price [6] - The stock has underperformed this year, down 7.3%, while competitors like Casey's General Stores have seen gains [12]

Core Viewpoint - Market sell-offs create opportunities for investors to acquire stocks at discounted prices, including steady dividend stocks like Murphy USA, which has seen a significant decline in share price despite strong operational performance [1][2]. Group 1: Company Overview - Murphy USA is the fourth-largest convenience store chain in the U.S., operating over 1,760 stores across 27 states and serving approximately 2 million customers daily [4]. - The company has been a strong performer since its market debut in 2013, achieving an 11-bagger return for investors [2]. Group 2: Operational Strengths - Despite a 22% decline in share price, Murphy USA's operations remain robust, with a focus on low prices and a strategic location adjacent to Walmart stores [5][6]. - The company has outperformed the U.S. fuel sales growth rate, achieving a 14% annual growth in gallons sold since 2013, compared to the 4% national average [7]. Group 3: Growth Strategy - Murphy USA plans to open 50 new stores annually and convert 30 kiosk stores into larger formats, resulting in a 4% annualized store count growth [8]. - The company has increased its gross profit margins from 5% in 2013 to 11% today, supported by a significant stock buyback program [8]. Group 4: Financial Performance - Management has reduced the outstanding shares by 57% since 2013, significantly boosting per-share financial metrics, including a tenfold increase in free cash flow per share [9][10]. - Murphy USA trades at a price-to-free cash flow (P/FCF) ratio of 23, which is below the S&P 500 average of around 32, indicating a submarket valuation despite historical outperformance [11][12]. Group 5: Dividend Growth - The company has increased its dividend for 12 consecutive quarters, nearly doubling its payments since 2021, with a current yield of 0.4% that utilizes only 9% of its free cash flow [14][15]. - This growing dividend serves as an additional method to reward shareholders alongside stock buybacks [15]. Group 6: Overall Assessment - Murphy USA is positioned as a staple goods provider with consistent cash flows, allocating half of its cash to new store growth and the other half to shareholder returns through buybacks and dividends [16].