On the topic of its last earnings report, CASY 's 1Q18 results were very solid as it easily beat analysts' expectations with the company posting its strongest revenue growth in many years. More specifically, it generated EPS of $1.90, well ahead of the $1.67 consensus, and up 30% yr/yr. The upside earnings result came after the company missed the bottom line estimates in seven of the past eight quarters. In addition to the much stronger revenue growth, improved margins in its fuel and grocery product lines boosted its earnings growth.
In the fuel segment, CASY has been more active in terms of managing retail fuel pricing, which helped push margins higher. Additionally, during the quarter, it converted 592 stores to bio-diesel, with another 78 stores adding premium or diesel products. These products (bio-diesel, regular diesel, premium fuel) all carry higher margins than regular fuel.
While it has been managing fuel prices and adding higher margin fuel products to its stores, CASY also has been less promotional on the grocery side and its fastest growing products also happen to be higher margin products, such as packaged beverages. This resulted in its average grocery margin improving by 50 basis points to 32.4%.
On the top-line, revenue jumped by 24% to $2.588 bln, also ahead of the $2.57 bln expectation. The company has now achieved double-digit revenue growth in six of the past seven quarters, which is a vast improvement over its performance in 2015 and 2016, when revenue was consistently declining on a yr/yr basis. Along with the aforementioned bump in margins, its growth was mainly driven by store expansion as it added 105 more stores during the quarter.
With some context on what drove its strong 1Q18 results, here is a look at what is expected for its quarterly report tonight: Analysts are forecasting EPS of $1.64 on revenue of $2.53 bln, representing yr/yr growth of 28% and 18%, respectively. While CASY doesn't provide EPS or revenue guidance, it does issue its outlook for same store sales for each of its three segments (Fuel, Grocery, and Prepared Food). In its Q1 earnings press release, it guided for FY19 same store sales growth of +1.5-3.0% for its fuel and for its grocery segments, with same store sales growth of 1.5-3.5% for its prepared food business.
CASY also said that it expects to open 60 stores for the fiscal year, while acquiring another 20+ stores. During the Q1 earnings call, management stated that it expects relatively even distribution of store openings this fiscal year, and, that it had 103 sites under agreement for new store construction.
So, new store development certainly figures to be a key growth catalyst for CASY going forward. However, the company has a couple other potential growth drivers ahead, including a new fleet card offering as it finalizes a fleet card program with FLEETCOR, as well as a new e-commerce platform, and continued fuel price optimization.
To conclude, tonight's report is an important one for CASY. Another upside performance would solidify that the company has really turned the corner and is executing its growth strategy well. On the other hand, a miss would cast serious doubts back into investors' minds, especially given the company's uneven financial performance in recent history.