Why Did Casey's General Stores Stock Tank This Week?
Key Points
Fuel margin tailwinds likely won't continue.
Same store sales growth slowed down.
Casey's long-term plan still looks on track.
Casey's General Stores (NASDAQ: CASY) reported a sharp jump in earnings this week, but investors weren't impressed. Shares have plunged 16% since last Friday, according to data provided by S&P Global Market Intelligence.
Casey's CEO, Darren Rebelez, called it an "outstanding first quarter performance," but investors are skeptical that the strong results will be ongoing. Here's why.
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Two factors have investors concerned as they look ahead. First, the company known for its made-from-scratch pizza saw a significant lift in fuel margins due to volatile global energy markets. That will likely revert in the coming quarters. Second, while same-store sales excluding fuel rose 3.2% year over year, this represented a slowdown in growth compared with the over-4 % increase last year.
The company itself seemed to support investor concerns by reiterating its full-fiscal-year outlook. With this first fiscal 2027 quarter starting stronger than expected, management also appears to expect underwhelming results over the next several quarters.
That might just be a conservative outlook, though, due to global oil price uncertainty and other macroeconomic factors. Investors with a longer-term outlook should be optimistic about Casey's. After a late 2024 acquisition of Cefco convenience stores from Fikes, Casey's is seeing robust sales improvements on those remodeled stores. A 30% jump in food and beverage sales shows the integration will be a boost for Casey's going forward.
Investors looking to add a growing consumer discretionary name to a portfolio may want to take advantage of this week's big stock drop.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Casey's General Stores. The Motley Fool has a disclosure policy.