Executive Summary / Key Takeaways

• Resilient Performance Amidst Headwinds: Murphy USA demonstrated remarkable resilience in Q3 2025, achieving flat EBITDA year-over-year despite a $0.02 per gallon decrease in fuel margins, driven by strong merchandise contribution and rigorous cost management.
• Accelerated Growth & Strategic Investments: The company is aggressively expanding its footprint, projecting over 45 new store openings in 2025 and 50+ in 2026, with new build classes consistently outperforming expectations, underpinning long-term EBITDA potential.
• Enhanced Shareholder Returns: Murphy USA reaffirmed its "50-50 capital allocation" strategy with a new $2 billion share repurchase authorization through 2030 and a 10% annual dividend increase, underscoring its commitment to shareholder value.
• Technological Edge & Operational Efficiency: Digital transformation initiatives, including loyalty programs (Murphy Drive Rewards, QuickChek Rewards) and advanced demand forecasting, are driving customer engagement, boosting merchandise sales, and optimizing operational costs.
• Leadership Continuity: The planned CEO transition from Andrew Clyde to Mindy K. West on January 1, 2026, signals continuity in strategy and a deep understanding of the business model, ensuring a steady course for future growth.

The Enduring Value Proposition: Murphy USA's Core Strategy

Murphy USA Inc. (MUSA) operates as a leading retailer of motor fuel products and convenience merchandise, primarily serving value-conscious consumers across the Southeast, Southwest, and Midwest United States. The company's business model, characterized by its everyday low-price (EDLP) fuel offering and strategic co-location of many Murphy-branded stores near Walmart Supercenters (WMT), has been a cornerstone of its success since its spin-off from Murphy Oil Corporation (MUR) on August 30, 2013. This strategic positioning leverages high traffic areas, providing convenient access to essential products at competitive prices. As of September 30, 2025, Murphy USA operated a network of 1,772 stores, including 1,620 Murphy-branded locations and 152 QuickChek-branded stores, the latter acquired in January 2021 to diversify offerings and expand into the Northeast region.

The company's overarching strategy, often referred to as its "50-50 capital allocation" approach, is designed to balance robust organic growth investments with consistent shareholder returns. This disciplined framework has seen Murphy USA repurchase nearly 60% of its outstanding shares since becoming public and consistently increase its quarterly dividend at a 20% compounded annual growth rate since its inception in December 2020. This commitment to balanced capital deployment reflects management's confidence in the long-term earnings power and resilience of the business model, even amidst fluctuating market conditions.

Technological Differentiators Driving Performance

Murphy USA has strategically invested in technology to enhance its competitive moat and operational efficiency. Central to this is its suite of digital capabilities, notably the Murphy Drive Rewards and QuickChek Rewards loyalty programs. These platforms are not merely discount mechanisms; they are sophisticated tools for customer engagement and data-driven personalization. Since its launch in late 2019, Murphy Drive Rewards has seen its membership base grow significantly, with QuickChek Rewards membership increasing by 30% year-over-year in Q1 2025. These programs foster customer stickiness, driving an 11% increase in merchandise transactions for Murphy Drive Rewards members and doubling mobile orders at QuickChek. Critically, 35% of QuickChek's in-store pickup items include additional sales averaging $7 per transaction, demonstrating the programs' ability to drive incremental revenue.

Beyond loyalty, Murphy USA leverages "super advanced demand forecasting" that integrates weather patterns, holidays, and other events to optimize labor planning and product availability. This technology has not only boosted profitability but also improved labor scheduling accuracy, addressing the "single biggest cost for convenience stores." The company is also in the early pilot stages of machine learning and artificial intelligence programs to personalize customer experiences further and enhance upsell suggestions. These technological advancements translate directly into tangible benefits: improved sales, better bottom-line profitability, and reduced overtime hours, contributing to a lower overall cost structure. The company's ability to execute promotions, particularly in nicotine categories, is unparalleled, with nicotine promotional dollars growing at an impressive 12% CAGR since 2020, and nicotine pouch volumes jumping from 45% to 120% of prior year volumes in October 2025, showcasing the efficacy of its digital and operational capabilities.

Competitive Positioning in a Dynamic Market

Murphy USA operates in a highly competitive and fragmented retail fuel and convenience store industry. Its primary direct competitors include integrated oil and gas majors like Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), Marathon Petroleum Corporation (MPC), and Phillips 66 (PSX), as well as other dedicated convenience store chains.

Murphy USA differentiates itself through a relentless focus on cost leadership and a value-driven proposition. Its low operating cost structure, often facilitated by its smaller-box format and strategic locations near high-traffic Walmart Supercenters, allows it to offer competitive fuel pricing. This positioning is particularly effective against larger, integrated players whose broader infrastructure and premium branding may entail higher operational overhead. While Exxon Mobil and Chevron benefit from extensive global scale and diversified energy portfolios, which often translate to superior financial resilience and growth rates, Murphy USA's regional agility and specialized retail efficiency provide a distinct advantage in its core markets. The company's ability to maintain a low-cost base enables it to "put some of that [margin] on the Street" to drive volume and capture market share, even in challenging low-price environments.

Compared to Marathon Petroleum and Phillips 66, which leverage integrated refining and logistics capabilities, Murphy USA's strength lies in its direct retail execution and customer-centric digital platforms. Its loyalty programs, unique in their focus on the nicotine category, provide an unparalleled ability to engage consumers and drive promotional effectiveness, leading to a 20x more effective use of manufacturer promotional dollars compared to the industry average. This capability helps Murphy USA gain share in categories like cigarettes, where its network volume has remained flat from 2021-2024 while the broader market declined by roughly 20%.

However, Murphy USA is not without vulnerabilities. Its dependence on fuel price volatility and the broader supply-demand dynamics of refined products can impact profitability, as seen in Q1 2025 when an oversupplied environment compressed product supply margins. Indirect competitors, such as electric vehicle (EV) charging networks and online fuel delivery services, also pose long-term threats by offering alternative solutions. Despite these challenges, Murphy USA's EDLP model, coupled with its low-cost position and growing digital capabilities, remains a powerful combination to appeal to an expanding pool of value-seeking customers, including a growing segment of middle to high-income consumers.

Financial Performance and Operational Momentum

Murphy USA's financial performance in Q3 2025 underscored its operational resilience. Net income for the quarter was $129.9 million, or $6.76 per diluted share, compared to $149.2 million, or $7.20 per diluted share, in Q3 2024. This decrease was primarily due to a $12.6 million restructuring charge, higher store operating expenses, increased depreciation and amortization, and higher interest expense. However, these impacts were significantly offset by a robust merchandise contribution, lower general and administrative (G&A) expenses, and a reduced income tax expense. Total operating revenues for Q3 2025 decreased by 2.5% to $5.11 billion, mainly due to a 7.2% reduction in the average retail fuel sales price, partially mitigated by a 1.2% increase in fuel sales volumes and a 3.7% increase in merchandise sales revenue.

Despite earning $0.02 per gallon less on fuel margins, the company generated $285.1 million in Adjusted EBITDA in Q3 2025, virtually flat to the prior year, demonstrating the underlying improvements made to the business. Total fuel contribution was 30.70 cents per gallon (cpg) in Q3 2025, down from 32.60 cpg in Q3 2024. Management believes the current margin structure includes a $0.03 to $0.04 structural uplift since 2022, which would translate to materially higher fuel contributions in a normalized environment.

Merchandise performance was a significant bright spot, with total merchandise contribution dollars increasing by 11.3% in Q3 2025 compared to Q3 2024. This growth was fueled by a more than 20% increase in nicotine categories due to strong promotional activity and a 5% growth in center-of-the-store categories. Total same-store sales (SSS) merchandise contribution dollars grew by 8.3%, with nicotine products up 18% and non-nicotine products up 0.1%. QuickChek also reported its fourth consecutive quarter of same-store food and beverage sales growth, with non-nicotine sales and margin both positive for the first time in 2025, up 3.1% and 5.8%, respectively.

Operational efficiency remains a core focus. Store and other operating expenses increased by 3.5% in Q3 2025, primarily due to new store operating expenses and higher employee-related and maintenance costs. However, Selling, General and Administrative (SGA) expenses decreased by 7.8% due to lower professional fees and an organizational restructuring. The company's debt-to-EBITDA ratio stood at a conservative 2.20 to 1 as of September 30, 2025, well within its covenant limits, providing ample liquidity and financial flexibility.

Strategic Outlook and Guidance

Murphy USA is poised for continued growth, with a clear strategic roadmap. The company anticipates total capital expenditures for the full year 2025 to range from $450 million to $500 million, primarily allocated to new store construction. New store openings are projected to exceed 45 for 2025, with a robust pipeline supporting over 50 new stores in 2026 and beyond. Currently, nearly 40 stores are under construction, expected to open in Q4 2025 and early Q1 2026. These new build classes are performing well above pro forma, with 2022 and 2023 classes outperforming the fleet average by nearly 20% in gallons and 40% in merchandising margin, generating 18% higher EBITDA per store in Q1 2025.

For the full year 2025, management has adjusted its fuel volume guidance to between 235,000 to 237,000 gallons per store per month. Merchandise contribution guidance has been tightened to the upper end of the range, between $870 million and $875 million, reflecting strong Q3 results and anticipated Q4 momentum. Operating expenses are expected to be lower, with a projected monthly per store operating expense range of $36,200 to $36,600, down from original guidance. Similarly, 2025 SG&A guidance has been lowered to $230 million to $240 million, excluding restructuring charges. The effective tax rate is estimated to be between 23.50% and 24.50%. With a $0.30 per gallon fuel margin placeholder, the company expects to achieve adjusted EBITDA close to $1 billion for 2025.

Looking further ahead, Murphy USA's updated 2028 EBITDA potential is around $1.2 billion. Management believes that a return to a more normal price and volatility environment could allow the company to claw back an additional $0.01 per gallon in fuel margin, bringing the potential to the original $1.25 billion plan, with a further $0.01 per gallon potentially yielding close to $1.3 billion. This outlook is supported by the expectation of continued structural upward pressure on retail fuel margins, driven by the higher breakeven economics of marginal retailers.

Risks and Leadership Continuity

While Murphy USA's outlook is compelling, investors should consider key risks. The company's profitability remains sensitive to fuel margin volatility, which Andrew Clyde described as a "trough" environment in Q3 2025 due to low prices and low volatility. The unpredictability of the Renewable Fuel Standard (RFS) program and fluctuating RIN prices also introduce uncertainty. Competitive pressures, particularly the "QSR value wars" impacting QuickChek's food and beverage margins, present ongoing challenges. Furthermore, temporal factors like severe weather events can significantly impact fuel volumes and merchandise sales, as evidenced by Q1 2025 performance.

However, the recent announcement of Andrew Clyde's retirement as CEO at year-end and Mindy K. West's succession as President and CEO on January 1, 2026, is framed as a move toward continuity. Mindy West, having been with the company since its inception as a public entity and serving as President and Chief Operating Officer, brings a deep understanding of Murphy USA's culture, financial discipline, commercial aspects, and customer connection. This planned transition, following a multi-year succession plan, ensures stability in leadership and strategic direction.

Conclusion

Murphy USA stands as a compelling investment opportunity, demonstrating robust resilience and a clear path for future growth. The company's foundational EDLP model, strategically positioned store network, and disciplined capital allocation strategy have consistently delivered value to shareholders. Recent financial performance, particularly the strong merchandise contribution and effective cost management in Q3 2025, highlights the business's ability to perform even in challenging fuel market conditions.

The company's commitment to technological innovation, exemplified by its loyalty programs and advanced demand forecasting, provides a distinct competitive edge, driving customer engagement and operational efficiencies. With an aggressive new store development pipeline and a reaffirmed capital allocation strategy that prioritizes both growth and significant shareholder returns through buybacks and dividends, Murphy USA is well-positioned to capitalize on evolving market dynamics. While fuel margin volatility and competitive pressures remain inherent risks, Murphy USA's structural advantages, operational excellence, and experienced leadership team underscore its potential for sustained earnings growth and long-term shareholder value creation.