CrossAmerica Posts “Strong Third Quarter”
Frankly, it wasn’t all that long ago that we last took a look at CrossAmerica Partners LP (NYSE:CAPL). While only two months have passed, CAPL stock has managed to rally an impressive 8.6%, recently hitting a new record high of $22.44. Thanks to strong third-quarter results and an encouraging outlook, it looks like 2025 could be another banner year for CrossAmerica stock.
CrossAmerica is a leading U.S. wholesale distributor of motor fuels, an operator of convenience stores, and an owner/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 one billion gallons of fuel. It hasn’t announced its 2024 results yet.
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.”
Why is this important?
Well, 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. But, businesses that have diversified their revenue mix to include more stable predictable revenue from convenience stores and restaurants have done better.
Because of diversified operations, North American service station sales are 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.)
Music to the ears of CrossAmerica Partners.
A Strong Third Quarter
For the third quarter ended September 30, 20024 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 retail segment sold 148.4 million retail fuel gallons during the third quarter, a 12% increase from the third quarter of 2023.
CrossAmerica 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. Our company-operated stores delivered solid results, with a two percent increase in same-store fuel volume and strong same-store merchandise sales.”
Maintains Quarterly Distribution of $0.5250 Per Unit
Now, technically, as a limited partnership, CrossAmerica stock doesn’t pay a dividend. Nor does it have shareholders. Instead, through the units, each limited partner owns a specific percentage of interest in the income from the entity. As a result, they are paid a share of the partnership’s income, which is called a distribution, not a dividend.
Thanks to CrossAmerica’s reliable cash flow from real estate rental income and motor fuel distribution, it is able to provide income investors with a reliable, high-yield distribution.
This past October, the company declared a dividend of $0.5250 per share, or $2.10 on an annual basis, for a forward yield of 9.6%. (Source: “CrossAmerica Partners LP Maintains Quarterly Distribution,” CrossAmerica Partners LP, October 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 September 30, 2024 was 1.26 times.
As for CrossAmerica 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.
Strong third-quarter results have helped it surpass those levels. As of this writing, CrossAmerica stock has gone up 4.5% over the last month and has rallied 18% over the last six months. Another strong quarter could propel CrossAmerica stock to fresh highs.
Chart courtesy of StockCharts.com
The Lowdown on CrossAmerica Stock
CrossAmerica Partners LP is an energy partnership that has a history of providing investors with great long-term capital appreciation and a reliable ultra-high-yield distribution.
It reported strong third-quarter results, has maintained a strong balance sheet, and kept up its unit distribution too.
While all companies want to perform well, CrossAmerica Partners might have a little more incentive: a whopping 52.3% of all shares are held by insiders. The high insider interest can entice management to put more effort into delivering stronger results. (Source: “CrossAmerica Partners LP (CAPL),” Yahoo! Finance, last accessed January 7, 2025.)
Wall Street has a lot of faith in CrossAmerica Partners, too, with 72 institutions holding 23.8% of all shares. Invesco Ltd is the biggest holder, with 5.72 million shares, or 15.03% of CrossAmerica stock. Other top institutional holders include JPMorgan Chase & Co., Raymond James Financial, and Blackstone Inc.