Casey's Q1 2026: Contradictions Emerge on Consumer Behavior, Fuel Synergy Timelines, and SEFCO Integration

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

Date of Call: None provided

Financials Results

• Revenue: $4.6B, up 11.5% YOY
• EPS: $5.77 per diluted share, up 19% YOY
• Gross Margin: 41.9% inside gross profit margin, up 20 bps YOY

Guidance:

• Annual guidance to be updated on Q2 call after seasonally largest months.
• August trends: same-store volumes in line with annual expectations; fuel CPG near $0.40; cheese costs slightly favorable YOY.
• Q2 operating expenses expected to be up mid-teens (last quarter comp without Fikes ownership).
• Share repurchases to continue through FY26 given modest leverage and strong cash flows.
• Seasonality unchanged; reported growth rates to normalize in 2H as Fikes laps.

Business Commentary:

* Strong Financial Performance and Earnings Growth: - Casey's reported a diluted EPS of $5.77 per share for Q1, a 19% increase from the prior year, with net income of $215 million, up 20%, and EBITDA of $414 million, also up 20%. - The growth was driven by positive traffic and margin expansion in grocery and general merchandise, as well as strong performance in prepared food and dispensed beverage categories.

• Prepared Food and Dispensed Beverage Sales:
• Same-store sales in prepared food and dispensed beverage were up 5.6%, or 10.2% on a two-year stack basis, with an average margin of 58%.

• Growth was attributed to increased traffic and innovation in products like the barbecue brisket pizza, alongside effective promotional activity and competitive pricing.

• Fuel Volume and Margin Management:

• Fuel gallons sold increased by 1.7%, with a fuel margin of $0.41 per gallon.

• The company achieved this by balancing fuel volume and margin, effectively managing market share gains in the Mid-Continent region, and maintaining a competitive pricing strategy.

• Grocery and General Merchandise Margin Improvement:

• Same-store grocery and general merchandise sales were up 3.8%, with an average margin of 35.9%, an improvement of approximately 50 basis points.
• Margin expansion was primarily due to favorable mix shifts, like higher sales of energy drinks and nicotine alternatives.

Sentiment Analysis:

• EPS $5.77, up 19% YOY; net income $215M (+19.5%); EBITDA $414M (+19.8%). Inside same-store sales up 4.3% with 41.9% margin (+20 bps). Prepared food and dispensed beverage comps +5.6%; grocery/GM margin +50 bps to 35.9%. Same-store fuel gallons +1.7% with $0.41 CPG; outperforming OPIS regional decline (~3%). Liquidity $1.4B; debt/EBITDA 1.8x; free cash flow $262M vs $181M prior year.

Q&A:

• Question from Pooran Sharma (Stephens Inc.): Can you unpack the benefit from lower cheese costs and how much of your needs are locked for the year?
  Response: About 70% of cheese needs are hedged for Q2–Q4 at comparable/slightly favorable rates; costs are roughly flat YOY, providing good visibility.

• Question from Pooran Sharma (Stephens Inc.): Update on Fuel 3.0 procurement penetration?
  Response: Fuel 3.0 represents ~8.8% of combined fuel procurement (~3% in the legacy base), driven mainly by Fikes; integration progressing well.

• Question from Charles Cerankosky (Northcoast Research Partners): Price versus volume in-store and category dynamics?
  Response: Traffic up ~1.5% and price ~3% (primarily tobacco passthrough); unit growth across categories, strongest in prepared food; non-alcoholic beverages and snacks performed well.

• Question from Charles Grom (Gordon Haskett Research Advisors): Consumer health across income cohorts and regional (Texas) trends?
  Response: All cohorts healthy; lower-income slightly softer (~160 bps), mainly in cigarettes; prepared foods strong. Texas/SEFCO stores under more pressure until remodels add Casey’s food offer.

• Question from Charles Grom (Gordon Haskett Research Advisors): SEFCO drag on prepared food margins improving; outlook?
  Response: Assortment cleanup and partial promo adoption narrowed drag (~110 bps vs ~150–160 bps), but major improvement awaits kitchen conversions; synergy capture is a year+ out.

• Question from Robert Griffin (Raymond James): Any update on the wings test?
  Response: Still iterative; refining flavors, builds, and equipment; broader rollout will occur only once fully validated.

• Question from Robert Griffin (Raymond James): Core prepared food margin momentum—sustainable and competitive implications?
  Response: Procurement gains and strong whole-pie growth (highest-margin subcategory) are lifting core margins and offsetting Fikes dilution; momentum expected to continue.

• Question from Anthony Bonadio (Wells Fargo Securities): Why are fuel gross profit dollars outperforming peers and what is the competitive backdrop?
  Response: Food-led traffic, strong value perception, and consistent competitive pricing drive higher fuel volumes without sacrificing margins.

• Question from Michael Montani (Evercore ISI): M&A backdrop (small vs. large) and earnings seasonality cadence?
  Response: Small-deal pipeline active and typical; larger deals discussed but nothing active. Seasonality unchanged; full-year guidance to be updated on Q2 call.

• Question from Bonnie Herzog (Goldman Sachs): Does Q1 strength imply conservatism in guidance and phasing?
  Response: Strong Q1 and August noted, but guidance will be revisited on Q2 call; seasonality and Fikes comp effects remain as previously communicated.

• Question from Bonnie Herzog (Goldman Sachs): Quantify promotional spend versus prior periods?
  Response: Most promotions are vendor-funded; while activity increased with scale, direct company promo spend remains limited.

• Question from Kelly Bania (BMO Capital Markets): SEFCO synergies, comps, and competitive environment update?
  Response: Integration on track; ahead on fuel and SG&A synergies; $45M target intact with upside likely post kitchen remodels; comps noisy until conversions.

• Question from Jacob Aiken-Phillips (Melius Research): Store growth outlook beyond the current 3-year plan and geography?
  Response: Framework targets 8–10% EBITDA growth with ~4–5% annual unit growth (half NTIs, half small M&A); significant whitespace in existing and adjacent markets.

• Question from Jacob Aiken-Phillips (Melius Research): How to measure success versus QSRs?
  Response: Benchmark prepared food/dispensed beverage comps; current +5.6% comp (+10% two-year stack) compares favorably to QSR/pizza peers.

• Question from Corey Tarlow (Jefferies): Drivers of grocery/GM growth and margin and outlook?
  Response: Non-alcoholic beverages, especially energy drinks, lead growth; margin lift from mix (less combustibles, more alternatives; NA beverages gaining share) and pricing discipline; no fixed margin target—optimizing total inside gross profit velocity.