Murphy USA Inc. reported second-quarter earnings per share of $7.36, beating market expectations and last year’s figure of $6.92, thanks to better fuel margins. However, the company’s revenues fell by 8.2% to $5 billion, missing estimates due to weak petroleum sales. Petroleum sales were only $3.9 billion, below the expected $4.2 billion, and down 11.3% from last year. On the upside, merchandise sales rose slightly by 1.1% to $1.1 billion.

Fuel Contribution and Margins

Total fuel contribution increased by 0.7% to $393 million, while retail fuel margins grew to 32 cents per gallon. Retail fuel contribution fell by 1.7% to $359.1 million, and retail gallons dipped 0.2% to 1,229.3 million, yet still exceeded forecasts. On its balance sheet, Murphy USA had $54.1 million in cash and $2.1 billion in long-term debt. The company also repurchased shares worth $211.9 million during the quarter, maintaining a debt-to-capitalization ratio of 76.2%. In other industry news, Valero Energy and Phillips 66 exceeded earnings expectations due to improved refining margins. However, PBF Energy reported a narrower loss than expected, thanks to lower costs and expenses. This earnings report sends mixed signals for traders. While strong fuel margins boosted profits, the 8.2% revenue drop points to declining consumer demand. This suggests that the company is squeezing profits from lower sales volumes, which may not last if demand continues to weaken into fall.

Market Outlook and Strategy

We’re monitoring recent data from the U.S. Energy Information Administration, which unexpectedly showed a 1.5 million barrel rise in gasoline inventories during the last week of July 2025. This coincides with the drop in retail gallons sold, indicating that consumers are driving less. This trend poses a risk, especially as the peak summer driving season begins to end. Due to the gap between strong profits and declining sales, we expect increased volatility in the stock in the coming weeks. A similar trend happened in fall 2023 when retail energy stocks sharply declined after a summer of strong margins hid weakening demand. Thus, buying put options to guard against potential downturns could be a smart move. In contrast, strong results from refiners like Valero and Phillips 66 demonstrate a divide in the energy sector. These companies are benefiting from solid refining margins, as shown by the 3-2-1 crack spread consistently staying above $35 a barrel through July 2025. This situation might create a trading opportunity, favoring refiners over retailers who rely more on consumer spending. We also need to consider the company’s high leverage, with a debt-to-capitalization ratio of 76.2%. This significant debt could make the stock sensitive to changes in interest rates or credit market conditions. The aggressive $211.9 million share buyback may support the stock price for now but could also deplete the company’s cash reserves in a weakening economy. Create your live VT Markets account and start trading now.

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