CAPL Stock: Bullish 10%-Yielder Reports Strong Q3 Results
November 25, 2024
CrossAmerica Partners Home to Reliable Dividend
Today’s stock pick in the spotlight is CAPL stock.
Over the last number of years, gas stations with convenience stores have faced headwinds due to fluctuating fuel prices and events like the 2020 health crisis, supply chain disruptions, inflation, and high interest rates. That said, the industry remains resilient as it shifts to more stable, predictable revenue sources from convenience store sales.
Thanks to a broader revenue mix, the worth of North American service stations is projected to grow from $12.6 billion in 2023 to $20.44 billion in 2031, expanding at a compound annual growth rate of 7.15%. (Source: “North America Filling Station and Gas Station Market by Application | Projections,” LinkedIn, September 30, 2024.)
One company that is expected to take advantage of this substantial growth is CrossAmerica Partners LP (NYSE:CAPL).
CrossAmerica is a leading U.S. wholesale distributor of motor fuels, an operator of convenience stores, and an owner and lessee of real estate used in the retail distribution of motor fuels. (Source: “Q3 2024 Earnings Call Presentation,” CrossAmerica Partners LP, November 7, 2024.)
With a geographic footprint that spans 34 U.S. states, CrossAmerica Partners distributes branded and unbranded petroleum for motor vehicles to over 1,800 locations. In 2023, the company distributed more than a billion gallons of fuel.
CrossAmerica also operates seven convenience stores at more than 250 locations across 10 states in the eastern U.S. The sites offer food, various essentials, and car washes. Some locations are also paired with prominent national brands such as “Arby’s,” “Dunkin’,” and “Subway.”
This past January, the company entered an agreement to buy 59 convenience stores from Applegreen for $16.9 million. The acquisitions closed in the second quarter.
The partnership has well-established relationships with several major oil companies, including Exxon Mobil Corp (NYSE:XOM), BP plc (NYSE:BP), Shell PLC (NYSE:SHEL), and Marathon Petroleum Corp (NYSE:MPC).
Retail Profits Jump 24%
For the third quarter ended September 30, CrossAmerica Partners reported net income of $10.7 million, down from $12.3 million in the same prior-year period. (Source: “CrossAmerica Partners LP Reports Third Quarter 2024 Results,” CrossAmerica Partners LP, November 6, 2024.)
The retail segment performed well, with gross profit increasing 24% to $83.6 million. The wholesale segment declined 16% to $27.6 million.
The company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $43.9 million, down slightly from $44.2 million in the third quarter of 2023.
Its distributable cash flow was $27.1 million.
During the third quarter, CrossAmerica sold nine properties for $7.2 million, resulting in a net gain of $5.3 million.
Commenting on the results, Charles Nifong, the company’s president and chief executive officer, said, “CrossAmerica posted a strong third quarter despite broader softness in fuel and store demand. Overall, retail segment fuel gallons, sales, gross profit and segment operating income were all materially higher year-over-year, driven by our strategic site conversions to the retail channel.”
CAPL Stock: Quarterly Distribution of $0.5250/Unit Maintained
Thanks to CrossAmerica’s stable cash flow from real estate rental income and motor fuel distribution, CAPL stock is able to provide income investors with a reliable, high-yield dividend. Most recently, in October, the company declared a dividend of $0.5250 per share, or $2.10 on an annual basis, for a forward yield of 10.3%. (Source: “CrossAmerica Partners LP Maintains Quarterly Distribution,” CrossAmerica Partners LP, October 23, 2024.)
That distribution is safe, too. CrossAmerica targets a coverage ratio of 1.2x. Its coverage ratio for the trailing 12 months ended September 30, 2024 was 1.26 times.
As for CAPL stock, it is rebounding after being hammered in May, following weaker-than-expected first-quarter results. Before the company reported its financial results in early May, CAPL stock was trading near record levels.
As of this writing, CAPL stock is up 14% over the last six months. While CAPL has made strong gains since May, it still needs to climb an additional 18% to reach its January 2024 high of $24.19.
Chart courtesy of StockCharts.com
The Lowdown on CAPL Stock
CAPL stock is a great energy pick that could provide investors with great long-term share price appreciation and a reliable, inflation-crushing dividend.
CrossAmerica reported strong third-quarter results, continues to have a strong balance sheet, and has maintained its ultra-high dividend distribution, too.
