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Casey's (CASY) Bullish Run on the Bourses Likely to Continue

Zacks Equity Research

Shares of Casey's General Stores, Inc. CASY have outperformed the industry in the past six months. We note that shares of this Ankeny, IA-based company have gained approximately 34% in the aforementioned time frame compared with the industry’s growth of 31.5%. Also, the stock has comfortably outperformed the Retail – Wholesale sector and the S&P 500 Index that advanced 5.2% and 5.4%, respectively, in the said time frame.

Meanwhile, this Zacks Rank #2 (Buy) stock is hovering close to its 52-week high of $173.31. With a long-term earnings growth rate of 9.1% and a VGM Score of A, Casey's is positioned to attain new highs.



The company is benefiting from its Value Creation Plan. This includes new fleet card program, price and product optimization, digital engagements comprising mobile app and online ordering capabilities, cost containment efforts as well as capital reallocation plan.

Backed by these tailwinds, the company delivered robust first-quarter fiscal 2020 results, wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate and also grew year over year. The results benefited from gross margin expansion, store growth, cost containment efforts and fuel price optimization initiative. (Read: Casey's Q1 Earnings Beat Estimates, Increase Y/Y)

Further, analysts are steadily growing bullish on the stock. This is apparent from the rise in earnings estimates. The Zacks Consensus Estimate for fiscal 2020 and fiscal 2021 has moved north by 33 cents and 39 cents to $6.22 and $6.66, respectively, in the past 30 days.

Let’s delve deeper into the factors that have been driving the company’s performance.

Factors Narrating Casey's Growth Potential

Casey's remains on track with its value creation plan to improve sales and profitability. Also, management is focusing on improving distribution efficiency. Management anticipates that the company’s cost-reduction initiatives are likely to result in savings of approximately $200 million in store-level operating expenditures by fiscal 2021.

The company launched the new Casey’s.com e-commerce website, rolled out new mobile app, initiated fuel price optimization platform across all outlets and will soon begin the process to launch loyalty program. At the end of fiscal 2019, the new fleet card program had more than 2,000 active cards and 500 new accounts.

Additionally, Casey's fleet card program, which involves managing and monitoring of initial sales, back-end system processing, billing and other consumer-oriented services, is likely to lift fuel sales. The company’s digitization efforts will help create a seamless shopping experience online as well as in-store, and facilitate same-store sales growth. Further, its price and product optimization strategy will help augment sales and fuel margin. Management reaffirmed fiscal 2020 fuel margin forecast of 20.5-22.5 cents per gallon compared with 20.3 cents reported in fiscal 2019.

The company is progressing well with its store expansion. During fiscal 2018, it opened 85 new outlets, acquired 26 stores, completed 30 replacements, and remodeled 74 stores. In fiscal 2019, it constructed 56 new stores and acquired 24. It closed 10 stores. Moreover, it plans to construct 60 and acquire 25 stores in fiscal 2020.

3 Other Stocks to Watch

Columbia Sportswear COLM has a long-term earnings growth rate of 11.2% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delta Apparel, Inc. DLA has a long-term earnings growth rate of 15% and currently carries a Zacks Rank #1.

Deckers DECK has a long-term earnings growth rate of 12.1% and a Zacks Rank #2 at present.

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