10-Q: CrossAmerica Partners LP Q2 2026 Earnings Show Margin Growth Amid Volume Dip

CrossAmerica Partners LP reported a 23% increase in operating revenues for Q2 2026, driven by higher fuel prices, though net income available to limited partners decreased due to lower gains on asset sales.

Summary

• CrossAmerica Partners LP reported operating revenues of $1.179 billion for the three months ended June 30, 2026, a 23% increase from $961.9 million in the prior year period.
• Net income available to limited partners was $20.1 million, a decrease from $24.5 million in the same period last year.
• For the six months ended June 30, 2026, operating revenues increased by 11% to $2.02 billion, while net income available to limited partners rose to $30.1 million from $16.7 million.
• The company experienced a decrease in fuel volume sold by 11% for the quarter and 9% for the six-month period.
• Gross profit increased by 12% to $112.8 million for the quarter and by 10% to $210.4 million for the six-month period.
• Operating income for the quarter decreased by 15% to $35.3 million, while for the six-month period it increased by 36% to $59.0 million.
• The company amended its Credit Facility on July 15, 2026, extending the maturity date to July 15, 2031, and adjusting financial covenants.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, with improved operating income driven by higher fuel prices and margins, though offset by lower volumes and a significant decrease in gains from asset dispositions compared to the prior year.

Positives

• Operating revenues increased by 23% to $1.179 billion for the quarter and 11% to $2.02 billion for the six months, driven by a significant increase in average fuel selling prices.
• Gross profit increased by 12% to $112.8 million for the quarter and 10% to $210.4 million for the six months, primarily due to higher motor fuel gross profit in both retail and wholesale segments.
• Margin per gallon in the retail segment increased by 33% for the quarter and 31% for the six months.
• Margin per gallon in the wholesale segment increased by 31% for the quarter and 14% for the six months.
• Distributable Cash Flow increased significantly to $33.6 million for the quarter and $55.1 million for the six months, leading to a Distribution Coverage Ratio of 1.68x and 1.38x, respectively.
• The Credit Facility maturity date was extended to July 15, 2031, providing greater financial flexibility.
• Availability under the Credit Facility was $248.5 million as of June 30, 2026.

Negatives

• Net income available to limited partners decreased by 18% to $20.1 million for the quarter, impacted by lower gains on asset dispositions.
• Total fuel volume sold decreased by 11% for the quarter and 9% for the six months.
• Gains on dispositions and lease terminations were significantly lower, $1.1 million for the quarter and $7.4 million for the six months, compared to $29.7 million and $35.2 million in the prior year periods.
• Operating income for the quarter decreased by 15% to $35.3 million.
• The number of retail sites decreased from 597 to 555 for the retail segment and from 1,004 to 981 for the wholesale segment due to asset sales.
• Interest expense on finance lease obligations increased due to the lease amendment with Getty.

Risks

• Motor fuel price volatility, influenced by crude oil prices and geopolitical developments, can significantly impact revenues, cost of sales, and gross profit.
• Competitive conditions in geographic markets may prevent the immediate passing on of wholesale motor fuel price changes to retail customers.
• Inflation can increase costs of goods sold and operating expenses, potentially impacting profitability if not fully passed on.
• The company relies on a limited number of suppliers for motor fuel (81% from four suppliers) and carriers (20% by top two carriers), creating concentration risk.
• The company's business is subject to seasonality, with sales volumes historically highest in Q2 and Q3 and lowest in Q1 and Q4.
• Failure to meet minimum volume purchase requirements under fuel supply agreements could result in penalties or termination of agreements.
• Environmental laws and regulations may require remediation of contaminated sites, incurring significant costs.
• The Topper Group's business strategy and operations, and potential conflicts of interest, could affect the Partnership.

Future Outlook

The company anticipates that its 2026 results will be impacted by continued evaluation of property class of trade, potential divestitures of lower-performing assets, and opportunistic acquisitions. Proceeds from asset sales are expected to reduce interest expense. The company will continue to pursue acquisition targets that fit its strategy, subject to market conditions and financing availability.

Management Comments

• "The amount of any distribution is subject to the discretion of the Board, which may reduce or eliminate the cash distribution at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future."
• "We believe that we will have sufficient cash flow from operations, borrowing capacity under the Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures, distributions on the preferred membership interests and partnership distributions."
• "We caution you that these statements are not guarantees of future performance and involve risks and uncertainties we cannot predict."

Industry Context

StockSavvy.ai notes that CrossAmerica Partners LP operates in a highly competitive and volatile fuel distribution and retail market. The company's performance is significantly influenced by crude oil prices, which directly impact fuel costs and selling prices. The trend of divesting lower-performing assets and optimizing the 'class of trade' for properties is a common strategy in the industry to improve efficiency and focus on core competencies.

Comparison to Industry Standards

• The company's Distribution Coverage Ratio of 1.68x for the quarter and 1.38x for the six months indicates a healthy ability to cover common unit distributions with distributable cash flow, which is generally viewed positively by investors in the MLP space.
• The increase in margin per gallon for both retail and wholesale segments, driven by fuel price volatility, is a common occurrence in the industry during periods of fluctuating commodity prices.
• The company's strategy of divesting non-core or underperforming assets is consistent with industry trends aimed at portfolio optimization and deleveraging.
• The extension of the Credit Facility maturity date aligns with industry practices to ensure adequate liquidity and financial flexibility for ongoing operations and potential growth initiatives.

Legal Proceedings

• The company is party to various lawsuits, claims, and legal proceedings arising in the ordinary course of business, seeking compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims, and other losses. Management believes these proceedings, in aggregate, will not have a material adverse effect on the company's financial position, results of operations, or cash flows.

Related Party Transactions

• Revenues from TopStar (affiliated with Topper Group) were $12.9 million and $9.1 million for the three months ended June 30, 2026 and 2025, respectively.
• Rent expense from leases with the Topper Group was $2.2 million and $2.5 million for the three months ended June 30, 2026 and 2025, respectively.
• Expenses incurred under the Omnibus Agreement with DMI (affiliated with Topper Group) totaled $30.9 million and $32.8 million for the three months ended June 30, 2026 and 2025, respectively.
• Distributions were made to the Topper Group and affiliates of John B. Reilly, III related to their common unit ownership.
• Accretion on preferred membership interests issued to related parties was $0.7 million for each of the three months ended June 30, 2026 and 2025.
• Maintenance and environmental costs incurred with an entity affiliated with the Topper Group totaled $0.5 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively.
• Convenience store products were purchased from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., with merchandise costs of $4.8 million for each of the three months ended June 30, 2026 and 2025.
• Office space is leased from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., with rent expense of $0.3 million for each of the three months ended June 30, 2026 and 2025.

Stakeholder Impact

• Shareholders: The decrease in net income available to limited partners for the quarter, despite revenue growth, may be a concern. However, the continued distributions and improved Distribution Coverage Ratio are positive.
• Creditors: The extension of the Credit Facility maturity date and compliance with covenants are positive for creditors, providing stability.
• Suppliers: The company's reliance on a few key suppliers for motor fuel presents a potential risk if supply chains are disrupted.
• Employees: Increased operating expenses due to inflation could impact labor costs, though the company has historically passed on costs.

Next Steps

• Continue to evaluate the highest and best use class of trade for properties.
• Continue to divest certain assets, particularly lower performing properties.
• Pursue acquisition targets that fit the company's strategy on an opportunistic basis.
• Monitor and manage fuel price volatility and its impact on margins and volumes.
• Manage debt levels and leverage ratios in compliance with the amended Credit Facility covenants.

Key Dates

Recommendation

The company shows resilience with improved margins and revenue growth driven by higher fuel prices, and a strengthened balance sheet through Credit Facility extension. However, the decline in fuel volumes and significantly lower gains from asset sales compared to the prior year temper enthusiasm. The current 'hold' recommendation reflects a balance between these positive operational improvements and the headwinds from declining volumes and reduced non-operational gains, suggesting a wait-and-see approach for further strategic execution and market stabilization.

Keywords

motor fuel distribution, convenience stores, retail fuel sales, wholesale fuel, gasoline, diesel, real estate optimization, credit facility