Analysts Weigh In On Casey’s Q4 Results

caseys 150The company is unlikely to roll off its assets into an MLP structure anytime soon.

Casey’s General Stores Inc.’s fiscal Q4 2014 results beat expectations. The convenience store chain reported diluted earnings per share of $0.59 for the fourth quarter of fiscal year ended April 30, 2014 compared to $0.60 for the same period a year ago. For the year, diluted earnings per share were $3.46 versus $2.86 for the same period last year.

“Inside sales were up over 13% for the fiscal year, and total fuel gallons sold increased by over 8%,” said Chairman and CEO Robert Myers. “We were able to add new stores and acquisitions in a disciplined manner while at the same time enhance the performance of our existing store base.”

Casey’s posted very strong in-store same store sales growth, with grocery (+7.2%) and prepared foods (+12.1%) both contributing to strong top-line growth. While fuel gallon growth of +1.8% was below that of the first three quarters, Casey’s was able to offset this weakness by selling 12.1MM RINs for $5.7MM, which boosted fuel margins by 1.4 cents per gallon (CPG) to 13.8 CPG, Wells Fargo Securities reported. “Operating expenses were up 10.0% for the quarter, outpacing gross profit growth of 7.6% driven by ongoing growth initiatives. Earnings Per Share was aided by a substantially lower tax rate in Q4 of 25.9% based on changes to state/local tax structures,” noted Bonnie Herzog, managing director, beverage, tobacco & convenience store research, Wells Fargo Securities LLC.

“Looking out to fiscal year (FY) 2015, despite the fact that Casey’s goals remain somewhat conservative following several years of solid performance and strong growth, we believe it will become increasingly more difficult to exceed expectations,” Herzog said.

“Bottom line, Casey’s had a solid finish to FY2014 with its strong Q4 results. However, Casey’s has in some ways become a victim of its own success, as it is continues to lap several years of exceptional performance. FY2015 could bring new challenges as Casey’s makes a bigger push for expansion into more competitive markets to support ongoing top-line growth. We therefore maintain our Market Perform rating. We introduce our FY2016 EPS estimate of $4.37 and raise our valuation range by $3 to $71-73, reflecting a 7.7x forward target EV/EBITDA multiple,” Herzog said.

Wells Fargo also noted that an MLP structure for Casey’s is unlikely “at least for now.” “Despite the benefits realized by others in an MLP structure, management indicated no intention of converting to an MLP anytime soon. This is largely driven by Casey’s lack of wholesale fuel distribution, and potential tax leakage related to transferring real estate assets. While the company confirmed it will continue to evaluate the opportunity of MLPs, a transaction is unlikely to occur in the near term,” Herzog said.






Speak Your Mind