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Murphy USA Inc. (MUSA) Soars to 52-Week High, Time to Cash Out?

·4-min read

Have you been paying attention to shares of Murphy USA (MUSA)? Shares have been on the move with the stock up 23.6% over the past month. The stock hit a new 52-week high of $289.81 in the previous session. Murphy USA has gained 44.4% since the start of the year compared to the 24.5% move for the Zacks Oils-Energy sector and the 25.3% return for the Zacks Oil and Gas - Refining and Marketing industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 27, 2022, Murphy USA reported EPS of $7.53 versus consensus estimate of $5.35 while it beat the consensus revenue estimate by 11.56%.

For the current fiscal year, Murphy USA is expected to post earnings of $18.27 per share on $23.42 billion in revenues. This represents a 22.45% change in EPS on a 34.91% change in revenues. For the next fiscal year, the company is expected to earn $14 per share on $23.57 billion in revenues. This represents a year-over-year change of -23.36% and 0.63%, respectively.

Valuation Metrics

Murphy USA may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Murphy USA has a Value Score of B. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 15.8X current fiscal year EPS estimates, which is a premium to the peer industry average of 6.2X. On a trailing cash flow basis, the stock currently trades at 12.1X versus its peer group's average of 9.1X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Murphy USA currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Murphy USA fits the bill. Thus, it seems as though Murphy USA shares could have a bit more room to run in the near term.

How Does MUSA Stack Up to the Competition?

Shares of MUSA have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Phillips 66 (PSX). PSX has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A.

Earnings were strong last quarter. Phillips 66 beat our consensus estimate by 15.79%, and for the current fiscal year, PSX is expected to post earnings of $14.49 per share on revenue of $137.14 billion.

Shares of Phillips 66 have gained 7.3% over the past month, and currently trade at a forward P/E of 6.07X and a P/CF of 9.29X.

The Oil and Gas - Refining and Marketing industry is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MUSA and PSX, even beyond their own solid fundamental situation.

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