CrossAmerica Stock: 10%-Yielder Reports Significantly Improved Results
September 3, 2024
CAPL Stock Pays Reliable Dividend
Things are looking good for CrossAmerica stock going forward.
The American economy is heavily dependent on consumer spending. In fact, consumer spending accounts for roughly 70% of the country’s gross domestic product (GDP).
Despite high interest rates, consumer spending remains resilient. Moreover, interest rates are set to start coming down, and it looks like the U.S. will avoid the long-promised recession. All of this bodes well for the U.S. economy and the companies that keep it chugging along, like CrossAmerica Partners LP (NYSE:CAPL).
CrossAmerica Partners 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: “Q2 2024 Earnings Call Presentation,” CrossAmerica Partners LP, August 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, it distributed more than one billion gallons of fuel.
The company also operates convenience stores under seven brand names 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.”
Back in January, CrossAmerica announced that it had entered an agreement to buy 59 convenience stores from Applegreen for $16.9 million. The company acquired the assets by terminating the partnership’s existing lease agreements at the acquired locations. The acquisitions closed in the second quarter.
The partnership has well-established relationships with several major oil companies, including Exxon Mobil Corp (NYSE:XOM). CrossAmerica Partners ranks as one of Exxon Mobil’s largest U.S. distributors by fuel volume and is one of the top 10 fuel distributors for other oil companies. Three of the company’s other fuel clients are BP plc (NYSE:BP), Shell PLC (NYSE:SHEL), and Marathon Petroleum Corp (NYSE MPC).
Significantly Improved Results
In early August, CrossAmerica reported significantly improved financial performance on a sequential basis. The company reported second-quarter net income of $12.4 million, or $0.31 per share, down from $14.5 million, or $0.36 per share, in the same period last year. However, it’s up from a loss of $17.5 million, or -$0.48 per share, in the first quarter of 2024. (Source: “CrossAmerica Partners LP Reports Second Quarter 2024 Results,” CrossAmerica Partners LP, August 7, 2024.)
The company reported second-quarter gross profit for its retail segment of $76.6 million, up 16% over the $66.0 million recorded in the second quarter of 2023 and up 40% over first-quarter 2024 gross profit of $54.4 million.
The retail segment sold 143 million retail fuel gallons during the second quarter, a nine-percent increase over 130.8 million gallons in the second quarter of 2023 and up 17.5% from 121.7 million retail gallons in the first quarter of 2024.
CrossAmerica reported second-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $42.6 million, up slightly from $42.2 million in the same prior-year period and up 81% over the $23.5 million recorded in the first quarter of 2023.
The company reported distributable cash flow of $26.1 million, down from $30.4 million in the second quarter of 2023. However, it was more than double the $11.7 million in the first quarter of 2024.
Commenting on the results, Charles Nifong, CrossAmerica’s president and CEO, said, “Our financial results for the second quarter were significantly improved from the first quarter, despite a continued overall soft fuel demand environment. Overall, our results demonstrate the stability of our business and that we remain well positioned for future growth.”
Maintains Quarterly Distribution of $0.5250 Per Unit
Thanks to the company’s stable cash flow from real estate rental income and motor fuel distribution, CrossAmerica stock is able to provide income investors with a reliable, high-yield dividend. Most recently, in July, CrossAmerica declared a dividend of $0.5250 per share, or $2.10 on an annual basis, for a forward yield of 10.2%. (Source: “CrossAmerica Partners LP Maintains Quarterly Distribution,” CrossAmerica Partners LP, July 23, 2024.)
That distribution is safe, too. The company targets a coverage ratio of 1.2x. Its coverage ratio for the trailing 12 months ended June 30, 2024 was 1.32 times.
That strong cash flow is also why CrossAmerica was able to provide shareholders with a quarterly payout throughout the entire 2020 health crisis. That’s in sharp contrast to a large number of energy plays that cut or suspended their payouts during this period.
As for CrossAmerica stock, it is rebounding after being crushed in May, following weaker-than-expected first-quarter results. Before the company reported its financial results in early May, CAPL was trading near record levels.
As of this writing, CrossAmerica stock is up more than four percent over the last three months and 14.5% on an annual basis. There is certainly room for CrossAmerica stock stock to run. Trading at $20.35, CAPL units need to climb 10.6% to get to their January 2024 record high of $22.51.
Chart courtesy of StockCharts.com
The Lowdown on CrossAmerica Stock
CrossAmerica Partners LP is a great energy stock we’ve been following for a while here at Income Investors. And for good reason, CrossAmerica stock provides investors with great long-term share price appreciation and a reliable, inflation-crushing dividend.
The company reported significantly improved second-quarter results, and remains well-positioned for the future; its ultra-high-yield dividend is safe, too.
