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Will Casey's (CASY) Stock Continue its Robust Show in 2019?

Zacks Equity Research

Casey's General Stores, Inc. CASY clearly appears to be a preferred pick, as it seems to have all it takes to catch investors’ attention. Notably, it is on track with 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.

All these factors helped the company to deliver robust second-quarter fiscal 2019 results, wherein the company continued its positive earnings and sales surprises for the second straight time. Also, both the top and bottom lines grew year over year. Markedly, the stock has gained 5.5% since the announcement of its quarterly results. (Read: Casey's Q2 Earnings & Sales Beat Estimate).

In the past six months, shares of this Ankeny, IA-based company have rallied approximately 23%, in line with the industry’s performance.



Further, analysts are steadily growing bullish on the stock. This is apparent from the rise in earnings estimates. The Zacks Consensus Estimate of $4.67 for fiscal 2019 and $5.03 for fiscal 2020 has moved north by 22 cents and 9 cents, respectively, in the past 30 days.

All said, let’s take a closer look at the aspects driving this Zacks Rank #1 (Strong Buy) stock, which also flaunts a VGM score of A.

Value Creation Plan: Key Catalyst

Casey's remains on track with its value creation plan to improve sales and profitability. Also, management is focusing on improving distribution efficiency. Further, the company’s cost-reduction initiatives are likely to result in savings of approximately $200 million in store-level operating expenditures by fiscal 2021. As part of the fuel product optimization plan, the company has converted 592 stores to biodiesel and 144 stores to premium or diesel. By the end of the third-quarter fiscal 2019, the company plans to convert 172 additional stores to premium or diesel.

Other Strategic Endeavors

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 by 2% in the first full year. Moreover, the program is anticipated to be accretive to fuel and in-store sales by the third quarter of fiscal 2019. FLEETCOR Technologies is handling the company’s fleet card program. 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 envisions same-store sales across fuel gallons, grocery & other merchandise and prepared food and fountain categories to increase more than 4%, 6% and 10%, respectively, by fiscal 2021.

The company is also gaining from its store expansion. During the first six months of fiscal 2019, Casey’s constructed 25 new stores and acquired three. Further, it plans to construct 60 stores and acquire at least 20 outlets in fiscal 2019.

Such strategic growth endeavors paint a bright picture for Casey’s, and keep us hopeful about the company’s prospects for this year as well.

Other Key Picks

Fossil Group, Inc. FOSL outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Urban Outfitters, Inc. URBN delivered average positive earnings surprise of 14.5% in the trailing four quarters. It has a long-term earnings growth rate of 7.5% and a Zacks Rank #2 (Buy).

Foot Locker, Inc. FL delivered average positive earnings surprise of 6.8% in the trailing four quarters. It has a long-term earnings growth rate of 11.2% and a Zacks Rank #2.

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