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Casey's General (CASY) is fueling up today, recovering from initial lows of around -2.7% following Q2 (Oct) results yesterday after the close. The fuel station and convenience store chain neared all-time highs leading up to Q2 numbers, the typical scenario for CASY throughout 2024. Against that backdrop, nitpicking can follow otherwise sound results.

Today's initially lackluster response likely stemmed from CASY reiterating its FY25 (Apr) outlook, including inside comps of +3-5%, inside margins comparable to FY24, and same-store fuel gallons sold to be between negative 1% and positive 1%, despite registering decent upside in Q2, including inside comp growth toward the high end of its full-year forecast and a modest uptick in inside margins. Also, trends for November were not noticeably impressive, with inside comps nearing the midpoint of CASY's FY25 outlook and fuel margins slipping toward the mid-to-high $0.30 range following over $0.40 in Q2.

Nevertheless, CASY's Q2 report showcased excellent management and a competitive edge in the gas station and convenience store market, a trend that has held strong throughout the past several years.

• For back-to-back quarters, CASY crushed earnings estimates while coming up short on revenue. Given its exposure to fuel, which can fluctuate depending on price and seasonality, revenue is more often hit or miss. However, as such, investors pay less attention to total sales, which dipped by 2.9% yr/yr to $3.95 bln, and more on earnings, which ticked slightly higher from last quarter to $4.85, and comp growth.
• Inside same-store sales ticked +4.0% higher in Q2, accelerating from +2.3% last quarter, with inside margins inching 50 bps higher sequentially to 42.2%. Prepared food and dispensed beverages led comps higher in the quarter, delivering +5.2% growth, supported by sustained momentum for hot sandwiches. Margins did compress by around 30 bps yr/yr due to higher costs associated with cheese, a lingering headwind. However, same-store grocery and general merchandise demand offset the modest margin contraction from prepared food.
  • A differentiating factor for CASY is that its storefronts can sometimes be the only grocery and general merchandise option for local consumers without traveling miles away, acting similar to a Dollar General (DG).
• Same-store fuel gallons sold turned -0.6% lower in Q2, reversing a +0.7% gain last quarter. However, the figure was consistent with CASY's commentary regarding August trends and its FY25 guidance. Fuel margins were $0.42 per gallon. Management mentioned that it continued outperforming its geographic region on volumes, indicating that it is taking market share.

While not enjoying a gas-and-go response today, CASY remains in high gear. The company consistently delivers decent quarterly results, supported by its competitive advantages, including successful prepared food marketing and lucrative locations across the Midwest U.S. where consumers often commute relatively long distances to school and work. As a result, we continue to like CASY.