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