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General Stores Casey’s, Inc. CASY released second quarter fiscal 2022 results, in which revenue not only exceeded Zacks’ consensus estimate, but also improved year over year. This is the fifth consecutive quarter of positive surprise sales. On the contrary, the bottom line missed the consensus mark and fell from last year’s tally.
A closer look at the results
Casey’s posted quarterly earnings of $ 2.59 per share, lower than Zacks’ consensus estimate of $ 2.92 and down from $ 3.00 the year before. This year-over-year decrease in net income is due to higher operating expenses and an increase in depreciation expense related to the operation of additional outlets compared to the period of the year. last year.
Total revenue of $ 3,262.9 million increased 47.3% year-on-year and exceeded Zacks’ consensus estimate of $ 3,154 million. Revenues increased in all three categories, fuel, groceries and general merchandise, and prepared foods and beverages distributed.
Inside sales jumped 13.1% to $ 1,139 million in the quarter under review. Internal same-store sales increased 6% compared to a 3.5% increase recorded last year. The metric improved due to the strong performance of packaged beverages, groceries such as salty snacks and meat snacks, as well as continued momentum for pizza slices, in part due to the increased customer traffic.
Shares of this company Zacks Rank # 2 (Buy) have appreciated 13.5% so far in the year compared to industry growth of 16.9%.
Image source: Zacks Investment Research
Margins and expenses
Gross profit increased 13.6% year-over-year to $ 717.6 million, thanks to higher revenues. However, the gross margin contracted 650 basis points to 22%. Internal gross margin increased 12.3% to $ 463.4 million. Management reported that Inside’s gross margin increased significantly despite pressures on product availability, particularly in the prepared food and beverage retail segment, and an inflationary supply chain environment. Meanwhile, the domestic margin declined 30 basis points to 40.7%.
Adjusted EBITDA decreased 2.8% year-on-year to $ 217 million as higher gross margin from inside store and fuel was offset by higher expenses of operations due to rising wage rates and credit card fees as well as the operation of an additional 161 stores.
Casey’s saw a 22% increase in operating expenses to $ 500.6 million. The measure increased due to the operation of 161 more stores compared to the same period last year, higher operating expenses for employees and same-store stores and higher expenses. from comparable store credit cards due to higher retail fuel prices and increased sales volumes.
Performance by categories
We notice that Fuel sales jumped 71.7% year-on-year to $ 2,048.8 million in the quarter. Well, the gallons of fuel sold jumped 15.8% to 668.8 million. Comparable store gallons sold were favorably impacted by improved customer traffic despite a difficult comparison from the previous second quarter. Same-store gallon fuel sales increased 2.5% in the current quarter compared to an 8.6% decline in the prior year period. Fuel gross margin increased 13.6% to $ 231.9 million. The fuel margin declined to 34.7 cents per gallon from 35.3 cents per gallon in the prior year period.
Groceries & General Merchandise sales increased 15.5% to $ 829.5 million. Comparable store sales increased 6.8% compared to a growth of 6.6% in the same quarter of the previous year. The Grocery & General Goods margin remained stable at 33.3%. Again, gross profit increased 15.5% to $ 275.9 million in the quarter.
Prepared foods and beverages distributed sales increased 7.2% to $ 309.5 million. Comparable store sales increased 4.1% compared to a decrease of 3.6% in the previous year quarter. Casey’s informed that the metric has been affected by supply chain bottlenecks, primarily in bakery and distributed beverages. The margin on prepared foods and prepared beverages increased 50 basis points to 60.6%. We note that gross profit jumped 8% year-over-year to $ 187.5 million.
During the six-month period ended October 31, 2021, Casey’s built seven new stores, acquired 144 stores and closed 12. As at October 31, 2021, the company operated 2,380 stores. The company now plans to add around 225 units in fiscal 2022, up from 200 previously, due to the recently announced acquisition of 40 stores from Pilot Corporation.
Other financial aspects
Casey’s ended the quarter with cash and cash equivalents of $ 311.7 million, long-term debt and finance lease obligations (net of current maturities) of $ 1,677.4 million, and equity of $ 2,123.1 million. During the quarter, the company did not repurchase any shares and still has an authorization of $ 300 million, which expires in April 2022.
Casey’s continues to envision increased fuel sales and domestic same-store sales in mid single-digit percentages in fiscal 2022. Management now expects operating expenses to increase in high percentages for adolescents compared to the previous view of the percentages for adolescents because of the additional units. as well as high credit card charges due to rising retail fuel prices.
The company plans to invest approximately $ 400 million in property, plant and equipment during the year, down from the previous projection of $ 500 million due to lower new store construction due to the ‘increased acquisition activities.
3 choices not to be missed
Some higher ranked stocks include, Boot Grange Holdings BOOT, Tapestry TPR and Target TGT.
Boot Barn Holdings, the lifestyle retailer of western and work shoes, clothing and accessories, sports a Rank 1 of Zacks (strong buy). BOOT has a surprise profit for the last four quarters of 35.3%, on average. You can see The full list of today’s Zacks # 1 Rank stocks here.
Zacks consensus estimate for Boot Barn Holdings’ sales and earnings per share (EPS) for the current year suggests growth of 54.6% and 188%, respectively, from a year ago .
Tapestry, which provides luxury accessories and branded lifestyle products, ranks Zacks # 2. The company has a surprise of 29% on average over the last four quarters.
Zacks’ consensus estimate for Tapestry’s sales and EPS for the current year suggests growth of 14.8% and 17.9%, respectively, from the prior year period. TPR has an expected EPS growth rate of 12.3% over three to five years.
Target, a general merchandise retailer, carries a Zacks Rank # 2. The company has a surprise profit for the last four quarters of 19.7%, on average.
Zacks’ consensus estimate for Target’s sales and EPS for the current year suggests growth of 13.9% and 40.1%, respectively, from the prior year period. TGT has an expected EPS growth rate of 14.4% over three to five years.
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