Casey's (CASY) Q4 Earnings Miss Estimates, Revenues Fall Y/Y

Casey's General Stores, Inc. CASY reported a negative earnings surprise in the fourth quarter of fiscal 2020, following a beat in the trailing seven quarters. Nonetheless, the bottom line improved on a year-over-year basis. Meanwhile, the top line came ahead of the Zacks Consensus Estimate, after a missing the same in the preceding two quarters. However, the metric declined from the prior-year’s tally. While the first half of the quarter looked strong, the COVID-19 outbreak hurt the company’s overall performance.

Shares of this Zacks Rank #3 (Hold) company have gained 6.8% in the past six months compared with the industry’s rally of 7.5%.

A Closer Look at Q4 Results

Casey's reported quarterly earnings of $1.67 per share that missed the Zacks Consensus Estimate of $1.97 but improved significantly from 68 cents posted in the year-ago period.

Total revenues came in at $1,812.9 million, down 16.8% year over year but beat the Zacks Consensus Estimate of $1,781.1 million. We note that decline in revenues across Fuel and Prepared Food & Fountain categories, was partly offset by increase in Grocery & Other Merchandise category.

In spite of decline in the top line, gross profit increased 16.1% year over year to $525.1 million due to fall in cost of goods sold. Notably, gross margin expanded to 29% from 20.8% in the year-ago period. Notably, the company witnessed a decline of 25.4% in cost of goods sold during the reported quarter.

However, Casey's registered an increase of 6.2% in operating expenses, primarily attributable to operating 61 more stores than the comparable period last year. Further, rise in hourly wage rates and higher costs of cleaning and other pandemic-related supplies also led to the increase in operating expenses. This was partly offset by fall in wage expense on account of reduction in hours at the stores and lower credit card fees.

Caseys General Stores, Inc. Price, Consensus and EPS Surprise

Caseys General Stores, Inc. Price, Consensus and EPS Surprise

Caseys General Stores, Inc. price-consensus-eps-surprise-chart | Caseys General Stores, Inc. Quote

Performance by Categories

We note that Fuel sales decreased 25.7% to $999.4 million. Fuel gallons same-store sales fell 14.7% compared with 2.8% decline witnessed in the year-ago quarter. Notably, fuel margin surged to 40.8 cents per gallon from 18.6 cents per gallon in the prior-year period. Management notified that macroeconomic factors that resulted in the fall of wholesale fuel costs contributed to fuel margins.

Gross profit increased 96% to $198.8 million, while total gallons sold fell 10.7% to 487.7 million. Rebelez, president and CEO, said, "Same-store gallons sold for the first half of the quarter were strong. Shelter in place restrictions for the back half of the quarter significantly affected quarterly gallon volume."

Grocery & Other Merchandise sales rose 1% to $568.1 million. However, same-store sales declined 2% against growth of 5.7% in the year-ago quarter. The company witnessed considerable momentum inside the store during the first half of the quarter. However, the customer traffic fell owing to the pandemic, consequently resulting in overall decline in volume.

Grocery & Other Merchandise margin contracted 110 basis points to 30.4%. Management informed that sturdy sales of lower margin products relative to other categories resulted in lower average margin for the quarter under review. We note that gross profit fell 2.4% to $172.9 million during the quarter.

Prepared Food & Fountain sales declined 9.5% to $229.9 million. Same-store sales decreased 13.5% against growth of 2% growth in the year-ago quarter. The metric remained robust during the first half of the quarter. However, sluggish traffic in the last half of the quarter and regulations prohibiting self-serve food service owing to coronavirus crisis hurt the company’s performance.

Further, Prepared Food & Fountain margin shrunk 220 basis points to 60%. Higher commodity costs compared with year-ago period and increased promotional activity in the back half of the quarter adversely impacted the margin. Gross profit fell 12.8% year over year to $137.8 million.

Store Update

During fiscal 2020, the company constructed 60 new stores and acquired 18. The company closed 13 stores. As of Apr 30, the company operated 2,207 stores.

Other Financial Aspects

Casey's ended the reported quarter with cash and cash equivalents of $78.3 million, long-term debt (net of current maturities) of $714.5 million and shareholders’ equity of $1,643.2 million. During the quarter, the company did not make any share repurchases and still has $300 million under authorization.

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