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On Friday, Raymond (NSE:RYMD) James analyst Bobby Griffin downgraded Murphy USA Inc. (NYSE:MUSA) stock from Outperform to Market Perform. The downgrade came after the company reported first-quarter earnings for 2025, which did not meet expectations. The stock has taken a significant hit, dropping nearly 12% over the past week. According to InvestingPro analysis, the company appears to be trading above its Fair Value, with current EBITDA at $999.9 million. Griffin noted that while one quarter’s results typically do not drive a rating change, Murphy USA’s recent performance and future outlook raised concerns about the company’s ability to grow its core EBITDA, particularly excluding potential spikes in fuel margins.
Murphy USA’s earnings for the first quarter of 2025 were underwhelming, leading to Raymond James’ reassessment of the stock’s outlook. The company faces profitability challenges, with InvestingPro data showing a modest gross profit margin of 7.35%. The analyst pointed out several challenges that could affect the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA). These include the end of multi-year nicotine share gains, operational expenses from new stores needing time to contribute to merchandise gross profit, and broader economic pressures on consumer spending. For deeper insights into Murphy USA’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Despite these concerns, Griffin acknowledged Murphy USA’s strong track record and the company’s robust business model within the U.S. convenience store sector. The company has shown commitment to shareholder returns, with dividend growth of 21.95% over the last twelve months. Over the past five years, Murphy USA’s stock has surged approximately 290%, and since the last upgrade by Raymond James in July 2021, the stock has seen gains of around 210%. However, the recent downturn on Thursday prompted a more cautious stance from the analyst.
The analyst also expressed concern about the stock’s valuation, noting that Murphy USA shares were trading at about 20 times the next twelve months’ (NTM) earnings per share (EPS). Current InvestingPro data confirms this rich valuation, showing a P/E ratio of 21.3x and a high Price/Book multiple of 12.19x. This valuation, according to Griffin, requires consistent year-over-year EPS growth to justify. Given the current lack of visibility into the company’s core EBITDA growth, Raymond James believes it is sensible to step back and adopt a wait-and-see approach until the growth outlook becomes clearer.
In other recent news, Murphy USA Inc. reported a disappointing first quarter for 2025, with both earnings and revenue falling short of analyst expectations. The company recorded an earnings per share (EPS) of $2.63, which was significantly below the projected $3.93, and revenue was reported at $4.53 billion, missing the forecasted $4.8 billion. Despite these challenges, Murphy USA continued its expansion efforts by adding eight new stores in the first quarter. Analysts from various firms have noted the company’s ongoing focus on value offerings and market share growth. Additionally, Murphy USA has been managing operational cash flow effectively, with $129 million reported in the first quarter. The company also repurchased 321,000 shares for $151 million and paid $9.8 million in dividends. Looking ahead, Murphy USA plans to continue its growth strategy, focusing on enhancing store productivity and efficiency.
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