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 Partnership

One 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 Experience

Murphy 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 Buybacks

The 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 Consider

However, 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 Position

Murphy 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.

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Additionally, its dividend yield is under 1% (like Casey’s General Stores), which may not satisfy investors seeking income in today’s market.

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The 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.

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Bottom Line: Balanced but Watchful

Murphy 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.

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This article originally published on Zacks Investment Research (zacks.com).

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