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Things You Need to Know Before Casey's (CASY) Q2 Earnings

Casey's General Stores, Inc. CASY is likely to register a decline in the top line when it reports second-quarter fiscal 2021 numbers on Dec 7, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $2,224 million, indicating a decline of 10.6% from the prior-year reported figure. However, the rate of sales decline is likely to decelerate on a sequential basis. The company had witnessed a decline of 19.9% in the last-reported quarter.

Impressively, the bottom line of this operator of convenience stores, is expected to improve year over year. Although the Zacks Consensus Estimate for earnings for the quarter under review has decreased by a penny to $2.63 over the past 30 days, it still suggests an improvement of 19% from the prior-year quarter.

Notably, this Ankeny, IA-based company has a trailing four-quarter earnings surprise of 14.2%, on average. In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate by a significant margin.

Key Factors to Note

With the resumption of economic activities, things have started to improve, however, the impact of coronavirus crisis cannot be ruled out. We note that Casey's has been grappling with soft fuel gallons same-store sales for quite some time now. In the last reported quarter, fuel gallons same-store sales decreased due to the ongoing pandemic and lower guest traffic.

The Zacks Consensus Estimate indicates a decline of 8.4% in the aforementioned metric for the fiscal second quarter. It also suggests a decrease of 5.2% in total gallons sold for the quarter. As a result, sales at the Fuel category might have declined year over year. The Zacks Consensus Estimate for sales for the Fuel category is pegged at $1,199 million, which suggests a slump of 20.8% from the year-ago period. However, we believe the company’s centralized retail pricing strategy and supply agreements are likely to have contributed to the company’s cent-per-gallon fuel margin.

Again, we note that the company’s Prepared Food and Fountain category may have remained under pressure. In the last reported quarter, lower store traffic and restrictions limiting self-serve prepared food items such as bakery and dispensed beverages hurt the segment’s performance. The Zacks Consensus Estimate for fiscal second-quarter sales for the category is pegged at $285 million, which indicates a decline of 4.3% from the prior-year quarter. Also, the consensus estimate indicates a decrease of 6.5% in same-store sales.

Nonetheless, Casey’s Grocery & Other Merchandise category might have provided some cushion to the company’s fiscal second-quarter top line. The segment is likely to have benefited from coronavirus-led spike in demand. The Zacks Consensus Estimate for sales for the category is pegged at $719 million, which suggests an increase of 8.8% from the prior-year reported figure. Also, the consensus estimate indicates a jump of 6.8% in same-store sales.

Certainly, efforts such as price and product optimization and digital engagements comprising mobile app and online ordering capabilities are commendable. The company has been also focusing on improving distribution efficiency. The rollout of curbside pickup option company wide and Casey’s reward program have been also contributing to the overall performance.

However, concerns related to higher operating expenses cannot be ignored. This may be due to store hours returning to pre-COVID levels and costs related to the ongoing pandemic. Also, any deleverage in commodity costs and higher promotional activity might have weighed on margins.

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

Caseys General Stores, Inc. price-consensus-eps-surprise-chart | Caseys General Stores, Inc. Quote

What Does the Zacks Model Unveil?

Our proven model predicts an earnings beat for Casey's this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Casey's has a Zacks Rank #3 and an Earnings ESP of +1.49%.

3 More Stocks With the Favorable Combination

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

Chewy, Inc. CHWY has a Zacks Rank #2 and an Earnings ESP of +4.85%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kroger KR presently has a Zacks Rank #3 and an Earnings ESP of +2.64%.

Ollie's Bargain OLLI has a Zacks Rank #3 and an Earnings ESP of +0.58%.

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