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Casey’s General Stores Posts Strong Sales for June

Casey’s General Stores reported strong increases in same store sales and gas volumes for June. Strong general trends show how effective the company’s strategic drive has been on internal sales and how well the Hy-Vee Fuel Saver program has impacted gas volume. The average margin on gas was higher than the company’s annual target of $0.153 per gallon, which seems to make sense taking into account standard recurring patterns.
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Casey’s also reported strong comparable same store sales for June, showing that the management has been seriously pushing their strategy to improve revenues. In June, internal same-store sales were above the company’s same-store sales goals at a 5.3 percent increase for groceries and other merchandise, and a 9.5 percent growth for prepared foods and fountain. Same-store sales on gas were above the company’s target of a 1 percent increase.

Analysts feel that growth was the result of the company modernizing their stores, introducing pizza delivery, as well as converting some of their stores to 24×7 and highly effective promotional activities. The Hy-Vee Fuel Saver program helped to deliver strong results for the company’s gas business, as stores running the program saw 3 percent growth, while stores without the scheme only experienced 1.8 percent increases for Q4.

In June, the company a slightly lower level of growth for groceries and other merchandise at 6 percent compared to 10.2 percent for the previous month and 6.2 percent for the same month of the previous year. Prepared foods and fountain also slipped slightly from 11.4 percent growth in the previous month and the same month a year ago to 9.6 percent growth for June of this year.

Gas volumes were up by 1.7 percent, but that’s still lower than the previous month’s performance of a 4.8 percent increase and also under the same month of the previous year when the company experienced a 2.0 percent growth. Gas margins, though, were higher than Casey’s annual target of $0.153 per gallon for June. Analysts are expecting a gas margin of $0.16 per calling for Q1. The reaction of the EPS to the change is gas margin is predicted to be $0.06 for every $0.01 per gallon. While the company is trading around valuation metrics, prices are still in the vicinity of its long-term averages.

The company’s valuation has gone down by 1.5 times its P/E ratio and 0.6 times its EV / EBITDA ratio based on estimates for 2015 compared to the previous month, as investors are anxious regarding gas margins over the short term and have, therefore, turned the sector around. While gas margins tend to increase on a cycle basis, analysts are expecting investors to refocus on the company’s strategic plans in terms of expanding their same store sales and revenues.

Casey’s General Stores is currently trading at 18.4 times EPS estimates for 2015 and 7.9 times EBITDA forecasts for 2015, which is approximately on par with analysts’ estimates of 18 times the EPS and 8.5 times the EBITDA. These valuation multiples are also on par with the top of the range in terms of the company’s long-term valuation.

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