Casey's Q1 EPS beats at $7.37, revenue $5.68 billion; stock falls
- Casey's Q1 EPS beat estimates at $7.37 vs $6.72, while revenue reached $5.68 billion
- Inside same-store sales grew 3.2%, slowing from 4.3% YoY; fuel gallons declined 0.3%
- Prepared food margins expanded 130 bps to 59.3%, aided by lower cheese costs
- Stock fell 9.69% post-earnings despite strong top-line and bottom-line results
- Company targets 120 new stores in FY27 and maintains $0.65 quarterly dividend
*this image is generated using AI for illustrative purposes only.
Casey's General Stores, Inc. (NASDAQ: CASY) shares fell 9.69% in after-hours trading on Tuesday, Sept. 8, closing at $662.40, despite reporting first-quarter earnings that beat analyst estimates.
The Ankeny, Iowa-based convenience retailer reported quarterly earnings of $7.37 per share, surpassing the consensus estimate of $6.72. Quarterly revenue came in at $5.68 billion, exceeding the projected $5.57 billion.
Q1 Financial Highlights
| Metric | Reported | Estimate | YoY Change |
|---|---|---|---|
| Revenue | $5.68 billion | $5.57 billion | Up from $4.57 billion |
| EPS | $7.37 | $6.72 | Up from $5.77 |
| Net Income | $274 million | N/A | Up 27% |
| EBITDA | $485 million | N/A | Up 17% |
While the top-line and bottom-line figures exceeded expectations, operational metrics showed signs of deceleration. Inside same-store sales rose 3.2% year-over-year, a slowdown from the 4.3% growth recorded in the comparable quarter last year. Fuel same-store gallons sold declined 0.3% year-over-year.
Operational Drivers and Segment Performance
Total inside sales for the quarter were $1.78 billion, an increase of $94 million or 5.6% from the prior year. Prepared food and dispensed beverage (PF&DB) sales rose by $34 million to $493 million, an increase of 7.4%. Grocery and general merchandise sales increased by $60 million to $1.28 billion, an increase of 4.9%.
Inside margin expansion was driven primarily by PF&DB mix. The gross profit margin for this segment was 59.3%, up 130 basis points from the prior year. This improvement was attributed to a 9% decrease in cheese costs (from $2.11 to $1.93 per pound) and a reclassification of internal distribution costs. Conversely, grocery and general merchandise gross profit margin was 35.6%, down 30 basis points, entirely due to the distribution cost reclass.
On the fuel side, retail fuel sales were up $991 million as the average retail price rose 33% from $3.00 to $3.99 per gallon. Total gallons sold increased by 2.5%. Fuel margin was 47.8 cents per gallon, up 6.8 cents from the prior year.
Strategic Initiatives and Headwinds
Management highlighted that approximately 1% of the total store base faced planned disruption due to the remodeling of legacy CEFCO stores as part of the FIKES acquisition integration. This created a headwind of approximately 25 basis points on inside same-store sales and 50 basis points on fuel same-store gallons. Despite this, remodeled stores have shown strong performance, with average PF&DB lift of approximately 30% versus pre-remodel results.
Darren Rebelez, chairman, president and CEO of Casey's, noted strong guest response to prepared food offerings, particularly whole pies, which saw unit growth of nearly double digits. He also highlighted the success of new chicken wings, which have been rolled out to 850 stores. About 38% of wing purchasers ordered wings only, increasing their overall prepared food purchase frequency by about 30%.
Analyst Ratings and Price Targets
Prior to the earnings release, Casey's stock had risen 0.6% to close at $758.42 on Thursday. Several analysts had recently adjusted their outlooks:
| Analyst | Firm | Rating | Price Target | Date |
|---|---|---|---|---|
| Mark Carden | UBS | Neutral | $925 (cut from $945) | Aug. 27, 2026 |
| Kelly Bania | BMO Capital | Outperform (upgraded) | $950 | June 29, 2026 |
| Steve McManus | BNP Paribas | Outperform | $1,030 (raised from $995) | June 25, 2026 |
| Bonnie Herzog | Goldman Sachs | Neutral | $795 (raised from $695) | June 25, 2026 |
| Irene Nattel | RBC Capital | Sector Perform | $850 (raised from $794) | June 25, 2026 |
Management Commentary and Outlook
Looking ahead, Casey's expects inside same-store sales to increase between 2% and 5% in fiscal 2027. The company anticipates same-store fuel gallons sold to be approximately flat, plus or minus 1%. Expansion plans include opening at least 120 stores in fiscal 2027 through a combination of mergers and acquisitions and new store construction.
Steve Bramlage, CFO, noted that total operating expenses were up 8% or $55.9 million. Approximately 2% of this increase was due to unit growth (64 more stores), 1.5% to same-store credit card fees, 1% to employee expenses (wage rates), and 1% to insurance. Net interest expense was $22.1 million, down $4.8 million versus the prior year due to deleveraging.
Balance Sheet and Capital Allocation
During the quarter, Casey's repurchased approximately $45.6 million of its common stock. The company ended the period with approximately $1.4 billion in available liquidity, comprising roughly $524 million in cash and cash equivalents and about $857 million in available borrowing capacity on existing credit lines. Free cash flow was $190 million, down from $262 million in the prior year, largely due to increased capital expenditures for CEFCO store remodels. The Board maintained the quarterly dividend at $0.65 per share.
What the Numbers Show
The market's negative reaction highlights a divergence between absolute earnings performance and underlying operational momentum. While revenue and EPS beats were driven by volume and margin resilience, the deceleration in inside same-store sales from 4.3% to 3.2% suggests softening consumer traffic or basket size. This slowdown, coupled with declining fuel gallons, may have outweighed the positive impact of the earnings beat for investors focused on long-term growth sustainability. Additionally, the significant drop in free cash flow, despite higher net income, underscores the capital intensity of the current CEFCO integration phase.
How will the deceleration in inside same-store sales from 4.3% to 3.2% impact Casey's ability to meet its fiscal 2027 guidance of 2-5% growth amid potential consumer spending shifts?
What is the long-term ROI timeline for the CEFCO store remodels, and when does management expect free cash flow to recover from the current capital-intensive integration phase?
Given the decline in fuel same-store gallons sold, how might Casey's adjust its pricing strategy or marketing efforts to stabilize fuel volume without eroding margins?
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