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Casey’s stock surges on Q4 earnings beat

Casey’s General Stores, Inc. (NASDAQ: CASY) stock surged 9% in the after-hours trading after the fourth quarter results came in ahead of expectations.

It’s worth noting that this would be the last earnings under the helm of CEO Terry Handley, who is departing from the store chain after a long stint of nearly four decades. Later this month, Darren Rebelez will be taking over the reins from Handley.

Revenue rose 4.3% to $2.18 billion compared to $2.08 billion in the prior year period. Earnings per share jumped 33% to 68 cents driven by new store openings, healthy margins and tight control of expenses. Q1 results surpassed estimates on both the top and bottom line metrics. Analysts were expecting EPS of 52 cents on revenue of $2.1 billion for the fourth quarter.

For the full-year period, sales rose 12% to $9.4 billion compared to $9.26 billion expected by the street. Casey’s reported earnings of $5.51 per share, 20 cents ahead of $5.31 per share estimated by analysts.

Looking ahead, for the Q1 2020 period, the top line is expected at $2.56 billion, flat over last year, and earnings per share to grow 2% to $1.94.

Commenting on the upbeat results, CEO Terry Handley said, “The combination of gross profit dollar margin expansion, a focus on controlling operating expense growth, and opening more stores were the primary drivers of that growth.”

At the end of April month, Casey’s operated 2,146 stores, an increase of 73 stores from last year. The retail chain also has inked deals to purchase eight more stores and earmarked 81 sites for new stores, out of which 41 are already under construction.

In the fiscal 2020 period, Casey’s plans to roll out its price optimization program which would help the chain to beef up its digital sales. Along the same lines, a new order management system and mobile app are expected to be unveiled in the first half and first quarter respectively in the next fiscal period.

Profit Drivers

On the key profit drivers front, same-store sales for grocery and food divisions grew 5.7% and 2% respectively, fuel sales was negative 1.7% hurt by tough wholesale pricing. However, fuel margins came in at 18.6 cents per gallon, up 14% over last year.

Grocery margins improved to 31.5% from 31.2% report prior year helped by customized product sales and increased promotions on high-margin products. Food margins increased by 4% to 62.2% due to the benefit of increased prices and lower costs.

Fiscal Outlook

Casey’s has lifted the guidance from last year and provided the following outlook for fiscal 2020 period for its three divisions.

CategorySame-store SalesMargins
Fuel(0.5%) – 1%20.5-22.5%
Grocery2.5-4.0%32-33%
Food3.0-6.0%61-63%

Looking Back

Last quarter, Casey’s profits dropped 78% due to tough comps against the previous year which included tax reform benefits which were one-time in nature. Excluding the benefit, earnings rose by 135% due to effective operating expense control, combined with a favorable fuel margin environment and continued focus on strategic pricing. Revenue decreased 0.32% over last year.

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