Murphy USA (NYSE: MUSA) earned $11.27 per diluted share in the second quarter, against $7.36 in the year-ago period, making the case that a network of gas stations and convenience stores can generate serious earnings power when fuel economics cooperate. The complication is inside the company's own numbers. Management's full-year guidance assumes second-half fuel margins averaging 35 cents per gallon, a step down from the 37.9 cents the first half produced, and expenses have been climbing on a path that does not depend on whether margins hold.
What drove the quarter
Total fuel contribution reached 40.6 cents per gallon in Q2, up from 32.0 cents a year earlier. The retail fuel margin specifically rose 20.2% to 35.1 cents per gallon. Volume moved alongside price: total retail gallons grew 3.9% and same-store volumes added 0.5%. Merchandise contribution rose 4.0% to $227.4 million on unit margins of 20.1%, with nicotine contribution up 6.1% and non-nicotine contribution up 2.9%. Net income came in at $209.1 million, and Adjusted EBITDA reached $377.3 million from $286.0 million a year earlier.
The company used the cash. Murphy USA bought back 143.1 thousand shares for $76.8 million and raised its quarterly dividend 28.0% year over year to $0.64 per share. In May it issued $500 million of notes due 2034 and used the proceeds to retire $300 million of 2027 notes. Six net new stores opened in the quarter; 36 more are under construction. Capital expenditures are guided to the higher end of the $475 million to $525 million range for the year, meaning the buildout pace is not slowing.
The counterargument
The counterargument sits in the cost structure. Total store and other operating expenses rose to $308.7 million from $275.2 million, with management attributing two-thirds of that increase to payment processing fees that scale automatically with retail fuel prices. SG&A climbed to $60.5 million from $50.9 million on higher employee costs and incentive accruals. The fuel supply contribution line, excluding renewable credits, was negative $54.9 million, a wider loss than the negative $25.9 million posted a year earlier. A drop in retail fuel prices would shrink processing fees, but the read-through is not clean: volume and merchandise margins would need to carry more weight.
On balance, management's full-year guidance implies roughly $636 million in net income and $1.25 billion in Adjusted EBITDA, both contingent on the 35 cent second-half margin assumption. The stock traded at a forward P/E of 17.67 as of September 4. Short interest sat at 3.98% of the float; hedge fund ownership edged down to 40 funds from 41 the prior quarter. The risk is a second-half fuel margin print that comes in below that 35 cent underwrite.