It has been about a month since the last earnings report for Casey's General Stores (CASY Quick QuoteCASY - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Casey's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Casey's Q3 Earnings Top, Inside Same-Store Sales Up 5.6%

Casey's General Stores, Inc. reported third-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate, while the bottom line beat the same. Impressively, both metrics improved from the year-ago period. Inside same-store sales also grew year over year. Results gained from prepared food and dispensed beverages, most notably pizza and donut sales, as well as strength in grocery and general merchandise in both alcoholic and non-alcoholic beverages.

A Closer Look at Results

Casey's, one of the leading convenience store chains in the United States, posted adjusted quarterly earnings of $2.36 per share, which beat the Zacks Consensus Estimate of $1.83 and increased from earnings of $1.71 reported in the prior-year period. Including a one-time benefit of approximately $15 million (or 31 cents a share) from the resolution of a legal matter, quarterly earnings came in at $2.67 per share.

The year-over-year jump in the bottom line can be attributed to higher profitability in fuel and inside the store. This was partly offset by an increase in operating expenses, driven primarily by operating 41 more stores than a year ago.

Total revenues of $3,332.6 million increased 9.3% year over year but missed the Zacks Consensus Estimate of $3,354 million. Revenues grew across all categories.

Inside sales jumped 8.2% to $1,109.2 million during the quarter. This increase was driven by the stellar performance in the grocery and general merchandise category, including non-alcoholic and alcoholic beverages, snacks and candy as well as pizza slices and donuts in the prepared food and dispensed beverage category.

Inside same-store sales increased 5.6% compared with a 7.6% rise registered in the year-ago period. The metric grew 13.6% on a two-year basis.

Margins & Expenses

The gross profit increased 11% year over year to $737.5 million due to higher revenues. The gross margin expanded 30 basis points (bps) to 22.1%. Inside gross profit grew 11.6% to $450.6 million. Meanwhile, the inside margin increased 120 bps to 40.6%. Adjusted EBITDA increased 27.9% year over year to $222.9 million during the quarter under discussion.

Casey's witnessed an increase of 5% in operating expenses of $515.7 million. A one-time benefit of about $15 million from a legal matter resolution lowered operating expenses by roughly 3%. Excluding that one-time item, operating expenses rose approximately 8%. The metric increased for operating 41 more stores compared with the same period last year.

We note that Fuel sales increased 10.5% year over year to $2,157.2 million during the quarter. Fuel gallons sold jumped 3.7% to 644.9 million due to an increase in the store count.

Fuel gallons same-store sales were down 0.5% during the quarter under discussion compared with a 5.7% increase in the year-ago period. Fuel gross profit rose 10.4% to $262.6 million owing to higher fuel margin. We note that the fuel margin increased to 40.7 cents per gallon from 38.3 cents per gallon in the prior-year period.

Grocery & General Merchandise sales rose 8.6% to $795.7 million during the quarter due to solid sales of packaged beverages, snacks, and candy. Same-store sales increased 5.8% compared with 7.7% growth in the year-ago quarter. Grocery & General Merchandise margin increased to 34% from 32% in the year-ago period.

Prepared Food & Dispensed Beverage sales rose 7% to $313.5 million, driven by the increased sales of pizza slices and donuts. Same-store sales increased 5% compared with 7.4% in the year-ago quarter. Prepared Food & Dispensed Beverage margin contracted 70 bps to 57.3%.

Store & Financial Updates

As of Jan 31, 2023, it operated 2,472 stores. The company expects to add approximately 80 stores in fiscal 2023.

Casey's ended the quarter with cash and cash equivalents of $413.2 million, long-term debt and finance lease obligations (net of current maturities) of $1,634.5 million and shareholders’ equity of $2,606.8 million. As of Jan 31, 2023, CASY had $876 million in available liquidity. During the quarter, Casey's did not make any share repurchases. The company has $400 million remaining under its existing share repurchase authorization.

FY23 Outlook

Casey's now estimates fiscal 2023 same-store Inside sales to increase 6-7%, up from the prior view of 5-7%. The company envisions an Inside margin of about 40% and same-store fuel gallons to be down 1% to up 1%. Casey's expects operating expenses to be near the low end of the annual range of about 9-10%. The company expects to invest roughly $450-$500 million in the fiscal year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Casey's has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Casey's has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.