Earnings preview: What to expect from Casey’s General Stores Q4 results

Casey’s General Stores (NASDAQ: CASY) is scheduled to report its earnings results for the fourth quarter of 2019 on Monday after the market closes. The convenience store chain’s results will be benefited by same-store sales as it continues to gain market share in key areas.

The results will be primarily driven by effective control of operating expenses and a stronger fuel margin. In the grocery and other merchandise segments, margin growth will be primarily driven by to a product mix shift toward higher margin items across the grocery and other merchandise segments, as well as promotion optimization.

In the prepared food and fountain category, margin growth is likely to be driven by the strategic price increases, product mix shift, and favorable commodity prices. The company continues to emphasize opportunities for process improvement to better manage operating expenses.

Analysts expect the company’s earnings to rise by 2% to $0.52 per share and revenue will inch up by 0.70% to $2.1 billion for the fourth quarter. In comparison, during the previous year quarter, the company posted a profit of $0.51 per share on revenue of $2.09 billion.

The company has surprised investors by beating analysts’ expectations thrice in the past four quarters. It is expected that Casey’s General Stores will report upbeat results for the fourth quarter. Majority of the analysts recommended a “hold” rating while expecting the stock to reach $139.20 per share in the next 52 weeks.

For the third quarter, the company reported a 78% dip in earnings as the previous year quarter included the one-time benefit of the enactment of tax reform. Excluding tax reform benefit, earnings soared by 135% helped by effective operating expense control, combined with a favorable fuel margin environment and continued focus on strategic pricing. Total revenue inched down 0.32% year-over-year.

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For the quarter, total average fuel margin was 22.1 cents per gallon, while same-store gallons sold were down 3.4%. Total gallons sold for the quarter were up 2.7% to 554.5 million gallons. In Grocery and Other Merchandise, same-store sales were up 3.4% with a total average margin of 31.9%. In Prepared Food and Fountain, same-store sales were up 1.5% with a total average margin of 62.3%.

The company had 17 acquisition stores under the agreement to purchase and a new store pipeline of 133 sites, including 48 under construction as of January 31, 2019. For fiscal 2019, the company expects same-store sales to be in the range of 1.5% to 3% in Grocery and Other Merchandise and 1.5% to 3.5% in Prepared Food and Fountain. Operating expenses are anticipated to grow by 7.5% to 9.5%, while the company expects new store construction in the range of 55 to 60 stores.

Shares of Casey’s General Stores opened higher on Friday but changed course to the red territory on the Nasdaq. The stock has risen over 35% in the past year and over 5% in the year so far.

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