Shares of Casey’s General Stores, Inc
. (CASY - Free Report
) have not only increased but also outperformed the industry
in the past three months. This Zacks Rank #3 (Hold) stock has risen 14% compared with the industry’s growth of about 11.5% in the said time frame. Also, this Iowa-based company boasts a VGM score
of B and is inching closer toward its 52-week high of $130.74.
The company is gaining from its value creation plan, which is likely to drive the top line. Despite such upsides, Casey’s is reeling from cost headwinds that may affect its bottom line in near future.
Furthermore, analysts are steadily growing bullish on the stock. This is apparent from the rise in earnings estimates. The Zacks Consensus Estimate of $4.62 for fiscal 2019 and $5 for fiscal 2020 has moved north by 10 cents and 11 cents, respectively, in the last 30 days.
Let’s Look Deeper
Casey's is on track with its value creation plan to improve sales and profitability. This includes new fleet card program, price and product optimization, loyalty program, digital engagements comprising mobile app and online ordering capabilities, cost containment efforts and capital reallocation plan.
Management is also focusing on improving distribution efficiency. Casey’s cost-reduction initiatives are likely to result in savings of approximately $200 million in store-level operating expenditures by fiscal 2021.
Further, Casey’s fleet card program, which involves managing and monitoring of initial sales, back-end system processing, billing and other consumer-oriented services, is likely to increase fuel sales by 2% in the first year. Moreover, the program is anticipated to be accretive to fuel and in-store sales by the third quarter of fiscal 2019. The company’s digitalization efforts will help create a seamless shopping experience, online as well as in-store, and facilitate same-store sales growth.
However, the company is witnessing a rise in operating and interest expenses that may weigh on margin and the bottom line. Additionally, higher credit card fees, fleet fuel prices and health care costs increased operating expenses. Moreover, the company continues to expect operating expenses to increase 8.5-10.5% during fiscal 2019. High level of debt also remains a concern.
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