Casey's Q1 2026: Contradictions Emerge on Fuel Margin Synergies, Economic Uncertainty, and Consumer Behavior

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 9, 2025

Financials Results

• Revenue: $4.6B, up 11.5% YOY (increase of $469M)
• EPS: $5.77 diluted EPS, up 19% YOY
• Gross Margin: Inside gross margin 41.9%, up 20 bps YOY; Prepared food margin 58%, down 30 bps YOY; Grocery & general merchandise margin 35.9%, up 50 bps YOY

Guidance:

• Will update full-year guidance on Q2 call after peak season.
• August trends: same-store volumes (inside and fuel) in line with annual outlook; fuel CPG near $0.40; cheese costs slightly favorable YOY.
• Expect Q2 operating expenses up mid-teens due to lapping non-ownership of Fikes last year.
• Continue share repurchases through FY26; primary capital allocation remains EBITDA/ROIC-accretive growth.
• Quarterly dividend maintained at $0.57/share.

Business Commentary:

* Strong Financial Performance: - Casey's General Stores reported net income of $215.4 million, representing an increase of 19.5% year-on-year, with EBITDA at $414.3 million, up 19.8%. - This growth was primarily driven by increased inside same-store sales and fuel gallons sold, along with margin expansion in grocery and general merchandise categories.

• Prepared Food and Dispensed Beverage Growth:
• Prepared food and dispensed beverage sales rose by $53 million, achieving an increase of 13.2%, with same-store sales up 5.6% or 10.2% on a 2-year stack basis.

• The growth was due to successful innovation and promotional activity in these categories, along with favorable guest response.

• Fuel Sales and Margin Expansion:

• Retail fuel sales increased by $178 million, driven by a 18% increase in fuel gallons sold, despite a 9% decline in the average retail price.

• The company managed to balance fuel volume and margin, achieving a margin of $0.41 per gallon, supported by strategic pricing and guest loyalty.

• Cost Management and Margin Improvement:

• The grocery and general merchandise category saw a 3.8% increase in same-store sales and a margin increase of approximately 50 basis points.
• This improvement was due to favorable mix shifts towards higher-margin items like energy drinks and nicotine alternatives, and successful cost management.

Sentiment Analysis:

• EPS rose 19% YOY to $5.77; revenue up 11.5%. Inside comps +4.3% with margin at 41.9% (+20 bps). Fuel same-store gallons +1.7% with $0.41/gal margin (up $0.03). Net income $215M (+19.5%) and EBITDA $414M (+19.8%). Management highlighted market share gains in fuel versus regional declines and cited an excellent balance sheet with $1.4B liquidity and 1.8x debt/EBITDA.

Q&A:

• Question from Pooran Sharma (Stephens Inc.): Can you quantify the cheese cost benefit and how much of FY26 needs are hedged?
  Response: Cheese was nearly flat YOY in Q1; ~70% of needs for Q2–Q4 are locked at comparable/slightly favorable rates.

• Question from Pooran Sharma (Stephens Inc.): Update on Fuel 3.0 procurement penetration?
  Response: Fuel 3.0 supplies ~8.8% of combined fuel (about 3% in legacy Casey’s), with most volume from the Fikes terminal; integration progressing.

• Question from Charles Cerankosky (Northcoast Research): How did price vs. volume break down inside the store?
  Response: Inside comps reflect ~1.5% traffic and ~3% price; pricing driven mainly by cigarette pass-through; unit growth broad-based, stronger in prepared foods.

• Question from Charles Grom (Gordon Haskett): What’s the consumer health by income cohort and any regional pressures (e.g., Texas/CEFCO)?
  Response: Lower-income shoppers remain engaged (~160 bps softer vs higher-income); prepared foods strongest; Texas/CEFCO stores under more pressure pre-conversion.

• Question from Charles Grom (Gordon Haskett): How is the CEFCO drag trending and when do synergies accelerate?
  Response: Assortment cleanup and selective promos reduced the drag (~110 bps on PF margin); major lift awaits kitchen conversions; material synergies are a year+ out.

• Question from Robert Griffin (Raymond James): What drove prepared food margin strength in the core business?
  Response: Improved procurement (notably beverages) and faster growth in whole pies, the highest-margin PF subcategory.

• Question from Anthony Bonadio (Wells Fargo): Why are fuel gallons and margins outperforming peers?
  Response: Prepared-food-led traffic, strong value perception, and consistent competitive pricing support gallons and margins without over-discounting.

• Question from Michael Montani (Evercore ISI): M&A backdrop (small vs. large deals) and any seasonal cadence changes?
  Response: Small-deal pipeline is normal; monitoring larger opportunities but nothing active; seasonality unchanged; will refine and update guidance at Q2.

• Question from Bonnie Herzog (Goldman Sachs): Given Q1 strength, any change to phasing or conservatism in the outlook?
  Response: Q1 and August were strong, but guidance will be reassessed at Q2; seasonality and Fikes comp effects remain unchanged.

• Question from Bonnie Herzog (Goldman Sachs): Can you quantify promo spend vs. prior periods?
  Response: Most in-store promos are vendor-funded; absolute promo activity is rising with growth, but direct company spend is limited.

• Question from Kelly Bania (BMO Capital Markets): CEFCO synergy progress relative to the $45M target?
  Response: On track and ahead in fuel and SG&A; major synergies come post-kitchen remodels; $45M still valid with potential upside once conversions ramp.

• Question from Jacob Aiken-Phillips (Melius Research): How to think about long-term unit growth and geography?
  Response: Target 8–10% EBITDA growth with ~4–5% annual unit growth (half NTIs, half small M&A); substantial white space within and adjacent to current footprint.

• Question from Jacob Aiken-Phillips (Melius Research): How do you benchmark success vs. QSRs?
  Response: Track PF/DB comps versus QSRs; Q1 PF/DB +5.6% (10% 2-year stack) compares favorably to peers.

• Question from Corey Tarlowe (Jefferies): Drivers of grocery/GM sales and margin, and sustainability?
  Response: Nonalcoholic beverages (esp. energy) led growth; margin up from mix shift to higher-margin beverages and nicotine alternatives plus COGS/retail discipline; focus is on total inside GP velocity, not a fixed margin target.