Casey’s General Stores, Inc. (CASY – Free Report) is expected to report first-quarter fiscal 2019 results on Sep 4. In the trailing four quarters, this operator of convenience stores has underperformed the Zacks Consensus Estimate by an average of 12.7%. In the last reported quarter, the company delivered a negative earnings surprise of 25%.
Let’s delve deeper and take a look at the factors that will be influencing the results of the to-be-reported quarter.
How Are Estimates Faring?
After registering a bottom-line decrease of roughly 33% in the final quarter of fiscal 2018, Casey’s is likely to record a year-over-year growth of about 15% in the first quarter of fiscal 2019. The Zacks Consensus Estimate for the quarter under review is pegged at $1.68 compared with $1.46 reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. The Zacks Consensus Estimate for revenues is pegged at $2,550 million, up approximately 22% from the year-ago quarter.
Which Factors Hold Key to Casey’s Performance?
Casey’s remains on track with its value creation plan to improve sales and profitability. This includes new fleet card program, price and product optimization, digital engagements comprising mobile app and online ordering capabilities, cost containment efforts as well as capital reallocation plan.
Management is also focusing on improving distribution efficiency. Casey’s cost-reduction initiatives are likely to result in savings of approximately $200 million in store-level operating expenditures by fiscal 2021.
However, we remain concerned about the company’s negative earnings surprise streak. Casey’s missed the Zacks Consensus Estimate for the third straight quarter when it reported fourth-quarter fiscal 2018 results. The top line also lagged the consensus mark, after exceeding the same in the trailing two quarters.
Fuel margin of 16.3 cents per gallon, declined 5.2% year over year. Management hinted fuel margin was at its lowest since fiscal 2014 due to rising wholesale fuel costs. Moreover, prepared food and fountain margin contracted 200 basis points to of 59.7% on account of increased input costs and promotional activity. Persistence of any of these factors will have a bearing on the quarter-to-be-reported.
