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Why Did Casey’s Stock Slip Despite Upbeat Q4 Earnings?
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Why Did Casey’s Stock Slip Despite Upbeat Q4 Earnings?

Story Highlights

Casey’s better-than-expected fourth-quarter earnings and solid top-line and bottom-line comparisons (year-over-year) fail to impress investors. Now, let us see how its exposure to multiple headwinds is weighing on the market sentiments.

Casey’s General Stores, Inc. (NASDAQ: CASY) has delivered better-than-expected earnings for the fourth quarter of Fiscal 2022 (ended April 30, 2022). Its earnings surprise in the quarter was 0.6%. Meanwhile, revenues were at par with the consensus estimate.

Shares of this $7.7-billion operator of convenience stores slipped 0.5% on Tuesday to close at $206.5. Despite upbeat earnings, its shares lacked momentum because of weak projections for Fiscal 2023 (ending April 2023).

Quarterly Highlights

Earnings in the quarter stood at $1.60 per share, above the consensus estimate of $1.59 per share. The bottom line expanded 42.9% year-over-year on the back of growth in sales. High costs and expenses played spoilsport in the quarter.

Revenues stood at $3.46 billion, in line with the consensus estimate. However, the top line increased 45.4% year-over-year, driven by a 62.2% hike in fuel sales and 14.5% growth in grocery & general merchandise sales.

Also, an 11.3% rise in prepared food & dispensed beverage (including breakfast offerings and pizza slices as well as alcoholic and non-alcoholic beverages) sales and a 289.8% surge in sales from other sources aided the top line.

It is worth mentioning that inside sales (including prepared food & dispensed beverage, and grocery & general merchandise) grew 13.6% in the quarter, while inside same-store sales expanded 5.2%.

The fuel same-store gallons were up 1.5%, grocery & general merchandise expanded 4.3% and prepared food & dispensed beverages advanced 7.6%. Exiting the quarter, the company had 2,452 stores.

In the quarter, the company’s costs of goods sold surged 54.2% year-over-year, and its operating expenses increased 15.2%. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) grew 17.8% year-over-year to $165.5 million.

Annual Highlights

In Fiscal 2022, earnings stood at $9.10 per share, up 8.6% year-over-year. Revenues of $12,952.6 million increased 48.8% from the previous year.

Exiting the quarter, Casey’s had cash and cash equivalents of $158.9 million, down 52.8% year-over-year. Its long-term debt and finance lease obligations (net) were $1,663.4 million, up 22.2% from the previous year.

The company’s cash flow from operating activities totaled $788.7 million in Fiscal 2022, reflecting a 1.9% year-over-year decline, and capital expenditure was $326.5 million, down 26% from the previous year.

Projections

For Fiscal 2023, the company anticipates inside same-store sales to grow 4%-6% year-over-year (versus 6.6% in Fiscal 2022). Change in fuel same-store gallons is predicted to be 0%-2% in the year (versus 4.4% in Fiscal 2022).

During the year, the company intends to increase its store count by 80. Also, it expects a year-over-year increase of 9%-10% in its operating expenses.

Management’s Take

The President and CEO of Casey’s, Darren Rebelez, said, “We had the most acquisitive year in our Company’s history, finishing the year with 2,452 stores. Thanks to the hard work and commitment of the Casey’s team, we are well-positioned to deliver on our long-term strategic plan commitments in fiscal 2023.”

Capital Deployment

During Fiscal 2022, Casey’s used $188.5 million for the repayment of long-term debts and paid dividends amounting to $51.2 million.

Exiting the year, the company is left to repurchase $400 million worth of shares.

The company also announced that its board of directors recently approved a 9% increase in its quarterly dividend. The new dividend of $0.38 per share will be paid on August 15, 2022, to all shareholders in the company’s record as of August 1.

Stock Rating

Overall, Casey’s has a Moderate Buy consensus rating based on five Buys, one Hold, and one Sell. CASY’s price target of $229.66 suggests 11.35% upside potential from current levels. Shares of the company have slipped 4% over the past year.

Bloggers’ Stance

According to TipRanks, 88% of financial bloggers are Bullish on CASY, compared with the sector average of 68%.

Conclusion

Casey’s solid product offerings, expansion through increasing store count, and commitment to rewarding shareholders handsomely will work well for it in the quarters ahead. However, weak cash position, huge debts, and headwinds from high costs and expenses are worrying.

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