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Casey's (CASY) Q3 Earnings Likely to Increase Y/Y: Here's Why

Zacks Equity Research

Casey's General Stores, Inc. CASY is scheduled to report third-quarter fiscal 2019 results on Mar 11, after the market closes. In the last reported quarter, the company delivered a positive earnings surprise of 16.1%. However, this operator of convenience stores underperformed the Zacks Consensus Estimate in the trailing four quarters, the average being 3.6%. Let’s see what awaits this quarterly release.

How are Estimates Faring?

The Zacks Consensus Estimate for third-quarter earnings is pegged at 90 cents, reflecting a significant increase from 48 cents registered in the year-ago quarter. Notably, the consensus mark has moved north by 3 cents in the past seven days. For revenues, the consensus mark is estimated at $2.2 billion, reflecting rise of 7.1% from the year-ago quarter’s figure.

Caseys General Stores, Inc. Price, Consensus and EPS Surprise


Caseys General Stores, Inc. Price, Consensus and EPS Surprise | Caseys General Stores, Inc. Quote

Factors Likely to Drive Results

Casey's remains on track with the value creation plan to improve sales and profitability. This includes new fleet card program, price and product optimization, loyalty program, digital engagements — comprising mobile app and online ordering capabilities, and cost containment efforts as well as capital-reallocation plan. Management is also focusing on improving distribution efficiency.

Notably, the company’s cost-reduction initiatives are likely to result in savings of approximately $200 million in store-level operating expenditure by fiscal 2021. As part of the fuel product optimization plan, the company converted 592 stores to biodiesel and 144 stores to premium or diesel. By the end of the third quarter of fiscal 2019, it plans to convert 172 additional stores to premium or diesel.

Apart from this, the company’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 increase fuel sales. Moreover, the program is anticipated to be accretive to fuel and in-store sales by the third quarter of fiscal 2019, which may serve as a tailwind. Further, Casey’s digitalization efforts will help create a seamless shopping experience, online as well as in-store, and facilitate same-store sales growth.

However, the company is grappling with higher operating and interest expenses. For fiscal 2019, Casey’s continues to expect an 8.5-10.5% increase in operating expenses. Certainly, any increase in operating expenses may hurt margins. Moreover, rise in wholesale fuel costs as well as higher input costs and promotional activity are concerns.

What Our Model Says

Our proven model does not predict that Casey's is likely to beat estimates this quarter. A stock needs to have — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — as well as a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Casey's currently carries a Zacks Rank #2, its Earnings ESP of -1.39% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Zumiez Inc ZUMZ has an Earnings ESP of +0.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Co. ANF has an Earnings ESP of +2.28% and a Zacks Rank #2.

Ollie's Bargain Outlet Holdings, Inc. OLLI has an Earnings ESP of +1.43% and a Zacks Rank #2.

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