Colonial Pipeline Shutdown A Near-Term Headwind For Murphy USA

Wells Fargo says Murphy USA Inc MUSA could face near-term headwind from the shutdown of Colonial Pipeline, which led to a short-term disruption in gas supply to several states in the Southeast U.S.

The brokerage expects the event to hurt MUSA's FY16 EPS by $0.05-$0.15 given the neutralization of margin benefit from increase in retail gas prices as stores aren't able to get fuel. Further, the inability of delivering fuel would hit MUSA's Product Supply & Wholesale division.

"Ethanol blending has also likely been impacted given lower fuel volumes potentially reducing the number of RIN (Renewable Identification Number) credits MUSA (and CASY) are able to sell," analyst Bonnie Herzog wrote in a note.

As such, Hezrog cut his FY16/FY17 EPS estimates by $0.16/$0.10 to $4.43/$5.21 and valuation range by $4 to $80-$82.

The analyst maintained his long-term bullish thesis on the stock.

"We maintain our Outperform rating as we continue to believe MUSA has a strong long-term outlook, however, given the uncertainty around the Colonial Pipeline, we see a negative risk/reward for the near-term," Hezrog added.

At time of writing, shares of Murphy USA fell 2.50 percent to $71.06.