10 Mar

Casey’s Downgrade: Why Northcoast Was Disappointed in Its 3Q17

WRITTEN BY Sonya Bells

Northcoast Research downgraded Casey’s

Northcoast Research downgraded Casey’s General Stores (CASY) from a “buy” to a “neutral” rating on Thursday, March 9. The rating revision comes after Casey’s weak third quarter results on March 6, 2017. The company posted weaker-than-expected results, missing Wall Street’s expectations for both top and bottom lines.

The company’s adjusted EPS (earnings per share) stood at $0.58, missing the consensus by a margin of $o.32. The earnings miss was largely driven by an increase in operating expenses, which rose 12.6% during the quarter.

Casey’s Downgrade: Why Northcoast Was Disappointed in Its 3Q17

The company’s top-line improved 13% to ~$1.8 billion, driven by a 19% jump in fuel sales and a 6% rise in in-store sales. The company, however, fell $50 million short of the consensus.

A look at other recent analyst actions

Casey’s was downgraded by RBC Capital from an “outperform” to a “sector perform” rating on March 7. Its price target was also revised down to $123.00 from $136.00.

On March 8, Feltl & Company downgraded CASY from a “strong-buy” to a “buy” rating. On the same day, Deutsche Bank lowered its target price to $120 from $135. On March 9, 2017, BMO cut its target price to $108 from $115.

A sneak peek at Casey’s stock market performance

Casey’s stock lost 0.6% and closed at $108.02, following the downgrade by Northcoast Research on March 9. Its share price has plunged 5.4% after the company reported its most recent results on March 6. The company has lost 9% of its value YTD (year-to-date).

By comparison, convenience store peers CST Brands (CST) and Murphy USA (MUSA) continue to be in the green and have registered YTD gains of 0.3% and 8%, respectively. However, supermarket peers Kroger (KR) and Supervalu (SVU) have fallen 16.5% and 28.3% YTD, respectively, as of March 9, 2017.

Notably, investors looking for exposure to Casey’s through ETFs can invest in the SPDR S&P Retail ETF (XRT). CASY makes up 1.1% of XRT.

Read the corresponding part of this two-part series for a look at Wall Street’s take on Casey’s.

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