Casey's General (CASY, Financial), a prominent fuel station and convenience store chain in the Midwest U.S., has outperformed Q3 (Jan) earnings expectations but faced a slight setback with a 0.1% year-over-year sales decline, contrary to the anticipated growth. Despite this, the stock has seen a +7% increase this year, showcasing its steady growth potential. However, the sales miss has tempered investor enthusiasm today.
Q3 highlights for CASY include:
- Sequential acceleration in inside same-store sales, growing by +4.1% in Q3, up from +2.9% in the previous quarter. This growth contributed to a 20 basis point increase in margins to 41.3%. The prepared food and beverage category led with a +7.5% comp and an impressive average margin of 59.6%, marking a 230 basis point improvement year-over-year. Additionally, grocery and general merchandise categories saw positive trends, benefiting from CASY's private label program.
- Easing commodity costs, especially for cheese, and moderate menu pricing adjustments helped improve margins. These factors played a significant role in CASY's double-digit earnings beat, with an EPS of $2.33.
- A slight decrease in fuel gallon comps by -0.4% and an 11% year-over-year decline in retail fuel sales due to lower average gas prices were noted. Despite these challenges, fuel margins remained strong at 37.3 cents per gallon, continuing an 11-quarter streak of margins above 34.5 cents per gallon. CASY's fuel volumes also outperformed its geographic market, despite a 5% volume decrease in the Mid-Continent region during the quarter.
- For FY24 (Apr), CASY maintains its financial outlook, expecting inside comp growth of +3.5-5.0%, margins of 40-41%, and same-store fuel gallons sold to range between -1% and +1%. Early Q4 trends indicate inside comps near the higher end of forecasts, with fuel gallons closer to the lower end.
Despite the lighter fuel comps potentially impacting overall growth, CASY's Q3 performance highlights its competitive advantage and consistent inside comp growth without sacrificing margins. Positioned in the Midwestern U.S., where driving is a necessity for many, CASY remains a strong buy-and-hold option for investors.
