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Why Casey’s Is Drifting into the Red Today

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Updated

Casey’s falls short of fourth-quarter expectations

The Iowa-based Casey’s General Stores’ (CASY) stock is deep into the red this morning after the company’s top and bottom lines missed expectations. It traded at $91.50 at 9:55 AM ET, down 5.05% from the previous day’s closing price. The company reported its results for the fourth quarter—which ended on April 30—before the opening bell this morning.

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Snapshot of results

Casey’s total revenue increased 13% YoY (year-over-year) to $2.09 billion, missing Thomson Reuters I/B/E/S Estimates by $40 million. Adjusted earnings per share rose 32% YoY to $0.51, 18 cents below expectations.

“A suppressed fuel margin and challenging weather had an adverse impact on fourth quarter results,” said Terry Handley, president and CEO of Casey’s.

Rising wholesale costs pressure fuel margins

Gasoline, which accounts for more than 60% of the company’s total sales, recorded a 20% YoY jump in quarterly sales to $1.32 billion. Same-store gallons increased 2%, in line with the company’s annual target of a 1%–2% rise in comps.

However, an average fuel margin of 16.3 cents per gallon fell short of the 18 to 20 cents a gallon goal.

“A rising wholesale cost environment in the fourth quarter resulted in the lowest quarterly fuel margin since fiscal 2014,” said Handley.

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Grocery and Merchandise comps move into the red

Grocery and Merchandise, Casey’s second-largest revenue segment, grew 2% YoY to $511.8 million. Same-store sales declined 0.4%, missing the annual target of 2%–4% growth.

“The combination of weather and a management decision to reduce 24 hour locations unfavorably impacted the quarterly same-store sales in the fourth quarter,” Handley explained.

The average margin for the segment stood at 31.2% of sales, in line with the annual goal.

Prepared Food and Fountain category continues to lag

The company fell short of comps as well as margin goals for this segment. Same-store sales declined 1.3% versus the 2%–4% growth goal. The company’s decision to reduce pizza delivery nights and adverse weather conditions negatively affected comps.

The average margin for the segment stood at 59.7%, missing the 61.5%–62.5% guidance.

Correction: An earlier version of this article wrongly suggested that Casey’s is based in Tennessee.  

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