Casey's Q1 Meets Expectations - Analyst Blog

Convenience stores operator, Casey’s General Stores Inc.’s (CASY) fiscal 2011 first-quarter GAAP net income declined 15.6% to $37.3 million from $44.2 million in the year-ago period. Excluding legal and advisory expenses related to the hostile takeover offer by Canadian convenience stores giant Alimentation Couche-Tard Inc., Casey’s posted adjusted earnings of 81 cents per share in the quarter, matching the Zacks Consensus Estimate.

During the quarter, Casey’s total revenue recorded a 14.7% growth to $1.36 billion from $1.19 billion in the year-ago quarter. The growth was primarily driven by a 6.8% year-over-year increase in gasoline volumes to 358.6 million coupled with same-store sales growth of 2.0% and 2.4% in Grocery and Other merchandise and Prepared Food and Fountain segments, respectively.

Casey’s gross profit in the quarter expanded 6.4% year-over-year to $234.0 million, while gross margin declined 140 basis points (bps) to 17.2%. Margins at Gasoline and Grocery and Other merchandise divisions declined, while that in the Prepared Food and Fountain remained flat.

Casey’s operating expenses increased 15.1% to $152.4 million mainly due to expenses associated with staving off the hostile acquisition bid by Alimentation Couche-Tard coupled with increased costs related to stores. Consequently, operating income (gross profit less operating expenses and depreciation and amortization) fell 11.2% year-over-year to $62.0 million from $69.8 million in the year-ago period.

At quarter-end, Casey’s had cash and cash equivalents of $198.1 million, compared to $170.8 million in the year-ago period. Long-term debt at the end of the quarter was $165.7 million, reflecting a long-term debt-to-capitalization ratio of 16.2%.

Moving forward, Casey’s expects to ramp up store count by 4% to 6% in fiscal 2011 and commenced the construction of 13 new stores and 9 replacement stores in the first quarter. The Zacks Consensus Estimate on the company’s earnings for the fiscal is currently pegged at $2.65 per share, which moved up 6 cents over the past month as 4 of 7 covering analysts raised expectations, while 1 moved in the opposite direction. The most accurate estimate is even more bullish at $2.71 per share, indicating a potential upside of 2.26% over the Zacks Consensus Estimate.
 
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