Casey’s Falls Despite 2Q Earnings Beat And Dividend Hike

Casey’s General Stores reported better-than-anticipated results for the second quarter of fiscal 2021 (ended Oct. 31) and increased its dividend. Despite the earnings beat, shares of the gas station and convenience stores operator were down 1.1% in pre-market trading today.

Revenue declined 11% in 2Q to $2.22 billion but came in slightly ahead of analysts’ forecast of $2.21 billion. Casey’s (CASY) revenue fell due to lower retail sales of fuel, partially offset by a 5% rise in Inside store sales. Inside same-store sales grew 3.5%, driven by the strong performance of alcohol, packaged beverage and tobacco categories coupled with continued strength in whole pizza pie sales.

Meanwhile, 2Q EPS grew 36% year-over-year to $3.00, beating analysts’ consensus expectation of $2.80. Earnings benefited from higher fuel margin and increased Inside stores gross profit. (See CASY stock analysis on TipRanks)

Additionally, the company announced a 6% hike in its quarterly dividend to $0.34 per share. The new dividend is payable Feb. 15, 2021 to shareholders of record on Feb. 1, 2021. Casey’s dividend yield stands at 0.67%.

Commenting on the results and dividend hike, CEO Darren Rebelez stated, “The Company delivered well-balanced financial results, with contributions from both ongoing strong fuel profitability and inside sales volume and profit improvements. Casey’s also recently announced an agreement for the largest acquisition in the Company’s history, the 94-store Bucky’s chain located primarily in Illinois and Nebraska. Finally, the Board’s decision to raise the dividend is a sign of continuing confidence in the Company’s ability to achieve strong financial results and maintain our already excellent financial flexibility in both the short and long term.”

Last week, Goldman Sachs analyst Bonnie Herzog resumed coverage of Casey’s with a Buy rating and $225 price target. The analyst called Casey’s her top Buy in the convenience stores space and stated that the company is in the early stages of a “very promising” transformation, which includes a “best-in-class,” high-margin prepared foods business and disciplined growth strategy that should widen its competitive moat over time.

The rest of the Street has a cautiously optimistic outlook on Casey’s, with a Moderate Buy analyst consensus based on 7 Buys, 3 Holds and 1 Sell. The average price target of $209.10 implies upside potential of 11.3% over the coming months. Shares have advanced 18% year-to-date.