Casey’s: Zacks’ Bull of the Day Play

Casey’s General Stores, Inc. (CASYSnapshot Report) is seeing strong momentum as gasoline prices fall and the American consumer buys more in their convenience stores. This Zacks Rank #1 (Strong Buy) recently reported record first quarter results.

Founded in 1959 in Des Moines, Iowa, Casey’s General Stores opened its first general store in 1968. It now operates 1,850 convenience stores in 14 Midwestern states. It’s the 10th largest convenience store chain in the United States.

If you’re not familiar with Casey’s, it could be because you live in a major metropolitan area. 57% of its stores are located in towns with less than 5,000 people.

It combines gasoline sales, with a convenience store and many offer its famous made-from-scratch pizza. Casey’s is the 5th largest pizza chain in the United States. Because of its focus on small town America, it is often the only pizza restaurant in town.

Record First Quarter

On Sep 8, Casey’s reported its fiscal first quarter 2016 results which ended on July 31, 2015. It beat the Zacks Consensus again, this time by 11.4%.

It has beat the Zacks Consensus six quarters in a row.

Earnings per share rose 23% even though its fuel margin declined 1.4 cents per gallon over the prior year because of margin expansion in prepared foods.

Same-store-sales in Prepared Foods and Fountain rose 10.3% with an average margin of 62.5%. The company has remodeled some stores, converted others to 24-hour service, and started delivering pizzas. Lower ingredient and supply costs also added to the improved margins.

Grocery sales were also strong with Grocery and Other Merchandise same store sales rising 7%. Cigarette sales were strong throughout the quarter.

In the fuel category, it grew same-store gallons sold by 3.4%, higher than its goal of 2% for the fiscal year. Casey’s had its managers quickly respond to price changes by competitors as the fuel market remained volatile.

Solid Numbers in August

On Sep 15, Casey’s reported its August same store sales numbers. For Prepared Food and Fountain, same-store-sales rose 8.4%. Grocery and Other Merchandise increased 5.7% year over year.

Same-store fuel gallons sold rose 3.4% in the month of August compared to August 2014. The fuel margin was also above the company’s full year goal of 16.7 cents per gallon.

Full Year Estimates Rise

The analysts like what they’re hearing.

2 estimates were raised in the last week alone, pushing the Zacks Consensus Estimate up to $4.85 from $4.52 just 30 days ago.

Earnings are expected to rise 5% in fiscal 2016 and return to double digit growth of 11% in fiscal 2017.

Shares Soar to New Highs

Investors ignored Casey’s until September 2014. Since then, shares have soared 56%.

You’re obviously not going to get the stock on the cheap anymore. It now trades with a forward P/E of 23x.

But growth projections look good and the company has momentum, especially from its pizza sales. Low gasoline prices are putting extra cash into everyone’s pockets. Why not eat out a few more times a month?

For investors looking for a way to play the return of the American consumer, Casey’s General Stores is one to keep on the short list.

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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