Casey's General Stores' Q2 2026 Earnings Call: Contradictions Emerge on Fuel 3.0, Margins, and Seasonality

Date of Call: December 11, 2025

Financials Results

• Revenue: $4.51B, up $559M or 14.2% YOY
• EPS: $5.53 diluted EPS, up 14% YOY
• Gross Margin: Inside gross profit margin 42.4%, up 20 basis points YOY

Guidance:

• Fiscal 2026 EBITDA expected to increase 15%-17%.
• Inside same-store sales expected +3%-4%; inside margin expected 41%-42%.
• Tax rate expected 24%-25%.
• Q3 operating expense expected up mid-single digits; full-year OPEX still expected 8%-10%.
• Share repurchases expected to total approximately $200M for the fiscal year (raised from ~$125M).
• No change to other annual guidance; Q3 will lap FICOS results in both periods.

Business Commentary:

* Operational Performance and Growth: - Casey's General Stores saw diluted EPS finish at $5.53 per share, and net income was $206 million, both earning an increase of 14% from the prior year. - The company generated $410 million in EBITDA, a 17.5% increase from the prior year. - The growth was driven by strong execution in the fuel strategy, increased guest traffic, and effective merchandising.

• Prepared Food and Dispensed Beverage Segment:
• Same store prepared food and dispensed beverage sales were up 4.8%, or 10.3% on a two-year stack basis, with an average margin of 58.6%.

• The increase was attributed to successful innovation and promotional activities, along with improved waste and cost management.

• Grocery and General Merchandise Segment:

• Same store grocery and general merchandise sales were up 2.7%, or 6.4% on a two-year stack basis, with an average margin of 36%.

• Growth was primarily due to favorable mix shifts to higher margin items and effective cost management.

• Fuel Segment Performance:

• Same-store gallons sold were up 0.8%, with a fuel margin of 41.6 cents per gallon.
• The performance was supported by strong premium and mid-grade demand, stable diesel sales, and consistent pricing discipline, despite a decline in the Midcontinent region's sales by approximately 2%.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management reported diluted EPS of $5.53 (+14% YOY), EBITDA $410.1M (+17.5% YOY), inside comps up 3.3% (7.5% two-year stack) and raised buybacks to ~$200M, while reiterating confidence in margins and guidance—signals of operational strength and management confidence.

Q&A:

• Question from Ed Kelly (Wells Fargo): Can you talk about the sustainability of your fuel outperformance and whether margins will revert in short order? And a quick follow-up on OPEX — OPEX was up 4.5% same-store; how should we think about the back half?
  Response: No change in approach—fuel outperformance is driven by a sticky in-store-led customer base and balanced pricing; expect seasonally lower fuel margins in Q3/Q4, and full-year OPEX guidance remains unchanged (8%-10%) with Q3 OPEX up mid-single digits.

• Question from Chuck Grom (Gordon Haskett) — Ryan Bell: As SEFCOS stores roll into the comp base next quarter, how do you expect mix differences, traffic (e.g., Texas), and margin impacts to play out?
  Response: SEFCOS stores have substantially lower prepared-food margins today (about half), but conversions and rebranding starting in the calendar year—especially larger stores with kitchens—should accrete margin over time; near-term blending will pressure margins.

• Question from Bonnie Herzog (Goldman Sachs): Your updated EBITDA guidance implies sequential deceleration in the back half — what drives that? And an update on M&A strategy after the Fikes acquisition?
  Response: The deceleration is largely mechanical from cycling FICOS/Fikes in the prior-year base; M&A strategy is unchanged—focus on tuck-in acquisitions with high asset quality and opportunistic larger deals.

• Question from Bobby Griffin (Raymond James): Given the multi-year reductions in labor hours, is the current high‑threes% same-store OPEX the right run rate going forward or are there still material opportunities to push it lower? And thoughts on promotional activity for alternative nicotine?
  Response: Most large labor-hour reductions are complete so future OPEX gains are expected to be incremental/tactical; the team is comfortable with current OPEX while continuing to optimize, and the nicotine category should keep growing though future promo cadence is manufacturer-dependent.

• Question from Chuck Cerankosky (North Coast Research): With declining gasoline costs, is there interplay with more/bigger prepared-food purchases and how do lower gas prices influence in-store promotions?
  Response: Lower fuel prices free up discretionary dollars, but the primary driver of higher prepared-food spend is our strong in-store value and product mix rather than fuel price alone.

• Question from Pooran Sharma (Stephens): Update on cheese hedging — how much is locked compared to prior quarter? Also, given November fuel margins, is a Q3-weighted split reasonable?
  Response: About 80% of cheese needs are locked for the next four quarters (we lock only when neutral or favorable); we won’t provide quarter-weighting guidance beyond noting November was low‑40s CPG.

• Question from Ben Wood (BMO) on behalf of Kelly Banya: What was the last 12‑month EBITDA contribution from CEFCO/Fikes relative to plan, how do you view NTI vs. acquisitions for new store growth and returns, and an update on the wings test/rollout?
  Response: Fikes/CEFCO is performing on plan and is EBITDA accretive with synergies realized over time (full synergies tied to remodel timing); store growth is typically planned ~50/50 NTI vs. acquisitions with mid‑teens returns target, and the wings test is nearing rollout after menu and procedural refinements.

• Question from Brad Thomas (KeyBanc): How confident are you in being insulated from competitive pressure from larger private convenience-store chains? And did the government shutdown/SNAP changes affect results?
  Response: We feel well‑positioned—Casey’s differentiated offer wins even in highly competitive markets—and SNAP is <2% of sales so the government shutdown had minimal measurable impact.

• Question from Mike Montani (Evercore): Can you unpack the state of the consumer and comp progression through the quarter, given K‑shaped dynamics and how November is trending?
  Response: Two‑year stacks accelerated to ~7.5% and traffic rose ~1.5%; consumers are more discerning but continue to visit and trade up within value propositions—prepared‑food strength is driving share gains.

Contradiction Point 1

Fuel 3.0 Impact on Fuel Procurement

It involves changes in the company's strategy and implementation related to its fuel sourcing initiative, which could impact operational efficiency and profitability.

Has your approach or competitive landscape changed? - Ed Kelly (Wells Fargo)

2026Q2: About 8.8% of our total fuel procured is through Fuel 3.0, with about 3% coming from our base business. - Darren Rebelez(CEO)

What is the status of Fuel 3.0 and its supply contribution? - Pooran Sharma (Stephens Inc.)

2026Q1: I think you're completely right, it's a good point. The 3% for us is quite meaningful, as you can imagine, because it's in nobody else's numbers. We've managed to do this by leveraging our current distribution network and adding more infrastructure on the back of it. - Darren Rebelez(CEO)

Contradiction Point 2

Fuel Margin Seasonality and Volatility

It involves differing expectations and explanations regarding the seasonal impact and volatility of fuel margins, which can significantly affect financial performance and investor expectations.

Cheese hedging update and Q3 vs. Q4 fuel margin split? - Pooran Sharma (Stephens)

2026Q2: Fuel margin seasonality is recognized, but specifics for next quarters can't be predicted due to market volatility. - Steve Bramlage(CFO)

Why have fuel margins exceeded expectations and how has the CEFCO headwind been addressed? What assumptions underlie Fikes' fiscal 2026 guidance? - Anthony Bonadio (Wells Fargo Securities, LLC)

2025Q4: Fuel margins improved by 365 basis points to 39.6% in the second quarter of fiscal year '25. Fuel margins were better than expected due to an orderly wholesale market and effective upstream fuel procurement enhancements. - Darren M. Rebelez(CEO)

Contradiction Point 3

Inside Margin Guidance and Pressure

It indicates differing expectations and explanations regarding inside margin guidance and the pressure on prepared food margins, which are critical for financial forecast accuracy.

How will integrating SEFCOS stores affect margins and traffic, considering their lower margins and Texas traffic dynamics? - Chuck Grom (Gordon Haskett)

2026Q2: Inside margins were 41.9%, 50 basis points ahead of fiscal year '25. We expect to maintain or improve our inside margins for fiscal year '26 through 12% growth in prepared foods and further grocery margin enhancement. - Steve Bramlage(CFO)

Can you break down the 41% combined inside margins for fiscal '26 between grocery and Prepared Foods? - Charles P. Grom (Gordon Haskett Research Advisors)

2025Q4: Inside margin guidance is at 41%. Fikes' integration will put downward pressure on prepared food margin due to its more protein-centric business. - Stephen P. Bramlage(CFO)

Contradiction Point 4

Fuel Margin Performance and Seasonality

It highlights differing expectations and explanations regarding the seasonality and predictability of fuel margins, which directly impacts the company's financial performance and investor expectations.

How sustainable is fuel performance in the current environment, and will margins revert in the short term? Have there been any changes in your approach or competitive landscape? - Ed Kelly(Wells Fargo)

2026Q2: Seasonally, margins are lower in the winter, but specifics for the next quarter can't be predicted. - Steve Bramlage(CFO)

What was CEFCO's 12-month EBITDA contribution, and what is the growth strategy for new stores? - Pooran Sharma(Stephens)

2025Q3: Fuel margins are still a bit above cost. As we go into winter, that margin will come down a bit. - Steve Bramlage(CFO)