Murphy USA Inc. (NYSE:MUSA) shares jumped more than 4% Thursday morning after analysts at Jefferies lifted the stock's rating to Buy from Hold in a research note. The firm also raised the price target for MUSA to $425 from $375 per share.
Analysts at the financial services firm said they decided to raise the rating and price target after conducting extensive analyses of the c-store industry.
They believe MUSA is well positioned for multiple expansion as fuel profitability remains higher for longer, MUSA benefits from the Walmart halo effect, and the company is rewarded for its ongoing strong track record of solid cash flow and shareholder value generation.
"Over the past several years, fuel margins, measured in cents per gallon (cpg), have been rising across the industry," explained Jefferies. "We believe this change is structural and will continue to trend higher for longer to offset increasing costs incurred by C-store operators."
Furthermore, with the majority of Murphy USA and Murphy Express branded locations co-located or within one mile of a WMT store and fuel discounts offered to Walmart+ members, Jefferies believes WMT's strong traffic trends could help drive trips to MUSA.
"Given our view that cpg will be higher for longer, ongoing benefits from the Walmart halo effect, and its attractive total value return track record, we believe that MUSA warrants to trade a premium to its historical average," concluded the firm.