Casey's strong fuel margins, reported with a 120-store expansion plan, bode well for Murphy USA

Casey's stock reacted within seconds of its after-hours report. For Murphy USA (MUSA), the fuel margin is what matters. Casey's same-store fuel gallons fell 0.3% from a year earlier, yet fuel gross profit rose 19.6% to $446.9M on a margin of 47.8 cents per gallon. That shows the gap between wholesale and pump prices for fuel retailers in that period. Murphy USA runs a high-volume, no-frills fuel business at more than 1,700 locations, with fuel making up most of its gross profit. Casey's quarter overlaps only partly with the quarter Murphy USA reports next. If conditions allowed Casey's 47.8 cents, they likely allowed a similar margin at Murphy USA. Analysts' fuel margin forecasts for Murphy USA have not moved. Different analysts cover the two companies, and the margin sits in a segment table, not the headline beat.

Investors see Casey's beat as a Casey's story, driven by new stores and in-store sales. Murphy USA (MUSA) is still valued on fuel margin assumptions from its last report, with no change to fuel margin forecasts after Casey's latest results.

Murphy USA (MUSA) is expected to report its next results in the coming weeks. If its fuel gross profit comes in below 42 cents per gallon on that call, the link is disproven. That would mean the fuel margins Casey's earned were specific to its Midwest stores. They would not have carried over to Murphy USA's Gulf Coast and Southeast base.

Geography is the main risk. Casey's operates mostly in the Midwest, while Murphy USA (MUSA) is concentrated in the South and Gulf Coast, where wholesale fuel prices and competition differ. A 47.8 cents per gallon margin for Casey's does not guarantee the same for Murphy USA if regional fuel spreads diverged during the quarter. The weak point is the assumption that fuel margins were the same across regions. Murphy USA's own reported margin on its next earnings call will settle it. Above 44 cents, the link held. Below 42 cents, it did not.

In one past quarter, Casey's reported a fuel margin of 42.3 cents per gallon. Murphy USA (MUSA) does not report at the same time. Casey's fiscal quarters end a month after calendar quarters, so the two companies cover different months. Murphy USA's next report usually comes several weeks after Casey's, so any read-through from Casey's takes weeks to be tested.