Casey’s Falls 3.5% on Missed Q2 Earnings

American convenience store chain Casey’s General Stores, Inc. (CASY) reported lower-than-expected second-quarter earnings, albeit revenues met expectations. The company also increased its full-year fiscal 2022 expense forecast due to the pending 40-store acquisition from Pilot Corporation.

Following the news, shares fell 3.5% during the extended trading session on December 7.

Weak Results

The company reported earnings of $2.59 per share, down 13.7% year-over-year and 30 cents lower than analysts’ estimates of $2.89 per share.

Meanwhile, total revenue of $3.26 billion grew 46.8% year-over-year meeting consensus estimate of $3.2 billion.

Compared to Q2FY21, Casey’s inside same-store sales jumped 6% and fuel gallons on a same-store basis climbed 2.5%. As of October 31, 2021, Casey’s operated 2,380 stores.

Management Comments

President and CEO, Casey’s, Darren Rebelez, said, “Inside gross profit was up sharply despite product availability pressures, especially in our Prepared Food and Dispensed Beverage business and an inflationary supply chain environment. Our fuel team achieved strong margins in a challenging rising cost market while also growing fuel gallons sold.”

Rebelez concluded, “We are making excellent progress integrating the Buchanan Energy and Circle K acquisitions and look forward to doing the same with the pending Pilot acquisition.”

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Outlook

Due to the pending acquisition of 40 stores from Pilot convenience stores, Casey’s updated its outlook for the full year fiscal 2022. The acquisition is expected to be earnings before interest, taxes, depreciation, and amortization (EBITDA) accretive in FY22.

CASY now expects to add up to 225 units in FY22, while operating expenses are projected to rise in the high-teen percentages. Interest expenses are projected to be $55 million, and depreciation and amortization expenses at $310 million.

The same-store fuel and inside sales forecast remains at mid-single-digit percentage growth as previously guided.

Analysts’ Take

Responding to Casey’s quarterly performance, Jefferies analyst Matthew Fishbein maintained a Buy rating on the stock with a price target of $237, which implies 17.8% upside potential to current levels.

Fishbein said, “We’d buy on potential weakness in the shares tomorrow given CASY’s advantaged positioning relative to less-scaled competitors, strong balance sheet, and balanced approach to unit growth.”

With 5 Buys and 1 Hold, the stock commands a Strong Buy consensus rating. The average Casey’s General price target of $248 implies 23.25% upside potential to current levels. Shares have gained 10.9% over the past year.

Smart Score

According to TipRanks’ Smart Score rating system, Casey’s General scores a 9 out of 10, which indicates that the stock has strong potential to outperform market expectations.