Casey’s Posts 56% Increase in Second Quarter Diluted Earnings Per Share
http://seekingalpha.com/pr/15577496-casey-s-posts-56-percent…
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But the revenue was down 10%. Also analyst don’t expect much growth in 2016 and 2017. Not sure how this passes the Saul criteria, just checking.
I wanted to reach out to actually to draw your attention to GRUB. I am a customer. I like the site a lot. I actually use seamless.com which they acquired.
They have a lock on their customers (the restaurants). The end users like me like the convenience of ordering online from single portal. They charge a hefty 20% or so in fees (to the restaurants) Most customers don’t know or care about that. I know it, and try to call the restaurants directly to place an order, but I find Seamless.com saves me time.
I have actually talked to mom and pop restaurants (one friend owns several restaurants). He hates them because of the fees, but has no choice but to use them. I think this is the priceline of restaurants in a nutshell. Basically I think of them as toll booth collectors. Except they didn’t have to invest upfront to build the bridge or highway. They built some software, but really, the investment is lot less. And due to the network effect, it’s hard for a competitor (e.g. Delivery.com) to gain traction.
I like it because they are still too early in their growth phase. 2015 revenue growth is expected to be 42% and 2016 is currently expected to be 25%.
I don’t see insider ownership. I am not sure if it passes Saul’s test. I own some. I am not as daring as you to make anything more than 2-3% of my portfolio. This one has received much less than that.
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huddaman, I have not had a chance to look at the numbers but I suspect revenue is down because gas prices are lower. So they could have sold more gallons but show less revenue. Profit margin is higher on lower priced gas and they sell more of it. It is sort of counter intuitive but less revenue means more profit.
Just a guess without checking.
Mike
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You are spot-on.
“Fuel - The Company’s annual goal for fiscal 2016 is to increase same-store gallons sold 2% with an average margin
of 16.7 cents per gallon. For the second quarter, same-store gallons sold were up 3.3% with an average margin of 24.7 cents per gallon. The Company sold 13.6 million renewable fuel credits for $4.7 million during the second
quarter. “Same-store gallons during the quarter continued to benefit from lower fuel prices,” said Myers. “We also
experienced a fuel margin well ahead of our annual goal due primarily to volatile wholesale costs during the
quarter.” For the year, total gallons sold were up 7.8% to 997.4 million gallons with an average margin of 21.1 cents
per gallon, while gross profit dollars rose 18.5%. Same-store gallons for the year were up 3.3%.”
Zangwei
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huddaman,
Knowing your investing style, you should really take a deeper look at CASY because I think you’ll like what you see. I view them as a restaurant with 10% SSS comps that happens to have a gas station attached. The growth is in the food business.
Jason
Long CASY
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But the revenue was down 10%.
Hi Huddaman, There’s a reason that they were up $5.50 today after those results came out. It is in my Casey mid-quarter review I posted a couple of weeks ago:
But what do they do to make money???
Selling fuel makes up two thirds of their revenue, but fuel sells at only about a 7% gross margin. But once people come to the store to buy gas they buy other things, with MUCH higher margins… and that’s where Casey makes its money. What that means is that you have to evaluate them on earnings growth, not revenue growth. What we are interested in is Merchandise and Grocery, at about a 32% margin, but especially their Prepared Food and Fountain Segment with an incredible 60% margin! And that includes their pizza, which is their specialty. In a way they are a pizza chain and café/restaurant chain, that also sells gas as a convenience for their customers.
So how successful have they been?
Remember that they haven’t reported this quarter yet (the October quarter). Well, for the last three quarters, their revenues have been $5.37 billion, down 10.5% from $6.00 billion. Sounds terrible, doesn’t it? But remember that most of their REVENUE is from gas, and gas prices have been down. However, cheaper gas allows them actually higher margins, and cheaper gas gives their customers more disposable income to spend on higher margin products. So…
And oil prices are falling too. It’s a perfect scenario for them. As far as the analysts, they don’t understand the company yet. They were way, WAY, WAY(!)OFF this year too. Here’s a headline from yesterday:
Caseys General Stores beats by $0.50, misses on revenue
Well, beats by fifty cents, in a quarter! Duh… does that sound like the analysts have a handle on this company.
Best,
Saul
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Thanks Saul and couple of other posters on your board for the explanation.
I checked their revenue growth ex-gas. It is 11.60% YoY, which is fairly respectable.
Also, good point on the fact that analysts may not have a handle on this business. So this appears to be your classic gas station business.
1900 stores with approx 133K net income per store per year for a company with marketcap of $4900 million amounts minus $1000 million of equity comes to to $1.52 million per gas station. It might be a good deal, but we are pricing this off of what appears to be peak margins unless you expect the gas prices to keep going down further. Any increase in gas price as some of you on the board suggest would have a detrimental effect on earnings.
I appreciate you and others for educating me about CASY’s. I feel I know a little more about it now than earlier.
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question:
It says on their IR Page
“The first stores opened in 1968 in small towns throughout Iowa. As of April 30, 2014, approximately 57% of all of our stores are located in areas with populations of fewer than 5,000 persons, while approximately 17% of our stores are located in communities with populations exceeding 20,000 persons. The company has a strong balance sheet and owns nearly all of its assets, enabling it to take advantage of growth opportunities.”
Does that mean most of their stores are owned and not leased?
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Casey’s balance sheet:
Buildings, Leasehold improvements $3.2 billion.
Net of depreciation $2.02 billion
Long term debt $ 838 million
Senior notes due 8/9/2020 $ 569 million (5.22%)
Factors affecting new stores: buying existing stores slow due to high prices (mom % pop stores also profitable right now).
Some expansion is in larger cities, land cost high and/or need higher priced, better locations with more expensive leases. I think.
KC
Does that mean most of their stores are owned and not leased?
I think it puts a floor on the stock price with respect to how far it might fall. Worst comes to worst, they still owe valuable real estate, a tangible asset.
Also Huddaman, I’m almost positive you’re a member of Stock Advisor, correct? You should check out the CASY SA community board. CMFBreakerJohn does a phenomenal job as a ticker guide over there. TMF1000 has also made a few of his page posts on the board. I’ve found it a very helpful board.
- Matt
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So this appears to be your classic gas station business.
Hi Huddaman,
Casey’s is NOT your classic gas station business. It’s a pizza parlor chain (it sells the fifth most pizzas of ANY chain in the US), and café restaurant chain, which also sells groceries, and sells gas as a sideline to help bring customers to the store.
Casey’s is a very interesting investment.
Best,
Saul
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Hi Huddaman,
Here is my take, when the oil/gas price is low, like what we have now, CASY earns fat margin, hence, higher eps even though lower revenue; when the oil/gas price is high (it will be, someday), small gas station outlets will earn less margin, so it will be easier for CASY to persuade them to sell the stations, so CASY will keep expanding via acquisition (paying reasonable price) plus its organic growth.
So, either way, CASY is in a win-win situation.
As Matt mentioned, there are lot of good posts on SA boards. And Saul had a great mid-Q review.
Zangwei
from their SEC filing
On April 30, 2015 , we also owned the land at 1,857 store locations and the buildings at 1,862 locations and leased the land at 21 locations and the buildings at 16 locations. Most of the leases provide for the payment of a fixed rent plus property taxes, insurance, and maintenance costs. Generally, the leases are for terms of ten to twenty years with options to renew for additional periods or options to purchase the leased premises at the end of the lease period.
Thanks again guys, I’ll also check out other posts on CASY and the SA board. Considering they own the real estate, the business becomes more valuable. Also good point Saul and thanks for clarifying that this is not your classic gas station convenience store.
Saul,
it sells the fifth most pizzas of ANY chain in the US
I think your statement is slightly inaccurate. I believe they CASY is 5th in the US based on number of locations that sell made-to-order pizza. In terms of sales however, I think they are lower.
According to this article, Papa Murphy’s is #5 with 1425 locations:
http://www.pizzatoday.com/industry-news/the-top-five-pizza-c…
As demonstrated by this article, some reports give CASY credit as a pizza chain while others don’t count them since they are categorized primarily as a convenience store chain.
CASY has a little less than 1900 stores, so that would place them above Papa Murphy’s by number of locations (which is how the article above is ranked), but if you look at Papa Murphy’s revenue they are at “$785 million in annual sales” according the the article.
By contrast CASY 2015 full year sales for their prepared food category (which includes donuts, subs, chicken, fountain drinks, etc.) was $780.9 million.
Based on my research I suspect that pizza sales are roughly 50% (±25%) of total prepared food sales, which would place them lower on the totem pole than 5th when measured by sales vs. location count. I’d guess they’re probably about top 10 in terms of pizza sales judging by this article:
http://www.pmq.com/December-2014/Pizza-PowerThe-2015-Pizza-P…
The top 50 are listed, although the stats are as of 2013. But I’d guess in pure pizza sales, CASY is probably somewhere between Chuckie Cheese’s (7th) and Marco’s (13th).
That top 50 chart also lists number of locations for each chain. Note that the top 5 are coincidentally in order by number of location, but beyond that number of locations doesn’t always correspond to total sales.
But “5th in the US in pizza” has a much better ring to it for us CASY shareholders, eh? 
Cheers,
Eric
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