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.
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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.
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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.
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