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Casey’s report strong Q4 same-stores sales growth

Casey's General StoresCasey's General Stores, Inc. (CASY) reported its fiscal 2016 fourth-quarter revenue that beat the analysts’ estimates. However, the earnings missed the Wall Street consensus by a single cent. Since the reported earnings were below the market’s expectations, the share price of the convenience store chain lost about 3% in a matter of two days.

Casey’s shares closed at $118.72 on Monday. Based on the following details, we believe that the company’s share price is poised for an uptrend in the days ahead. For the fourth-quarter, Casey’s reported revenue of $1.58 billion, compared to $1.65 billion in the fourth-quarter of fiscal 2015. The decline in the fuel prices was mainly responsible for the decline in the revenue. However, the reported revenue was higher than the analysts’ expectation of $1.57 billion.

Strong margins enabled the company to post fourth-quarter earnings of $47 million or $1.19 per share, up 14% from $41.3 million or $1.05 per share in the similar period last year. The earnings estimate of analysts was $1.20 per share for the quarter. For the fiscal 2016, the Iowa based company posted an increase in the net income to $226 million or $5.73 per share, up 12% from $180.6 million or $4.62 per share in the fiscal 2015.

Caseys General Store

During the fiscal year 2016, on a y-o- y basis, the company reported a 8.7% decline in the revenue to $7.12 billion. Casey’s recorded revenue of $7.77 billion reported in the corresponding period last fiscal year. However, it should be noted that the company’s competitors, CST Brands (CST) and Murphy USA (MUSA) reported a 10% and 25% decline, respectively, in their revenue.

During the fourth-quarter, in the fuel segment, the same-store gallons increased 4.6%. The average margin was 17.8 cents per gallon. With a same-store gallons sales growth of 3%, the company exceeded its fiscal 2016 target of 2% growth. The average full year margin was 19.6 cents for the gallon.

In the grocery and other merchandise segment, the fourth-quarter same-store sales increased 7.4% with a margin of 32%. The company also reported a same-store sales growth of 7.1% with a margin of 31.9% for the fiscal 2016. Casey’s was targeting a growth of only 6.2% for the fiscal 2016.

In the prepared food and fountain segment, the company realized an average margin of 61.9% with a same-store sales growth of 8.4%. For the fiscal 2016, the same-store sales rose 8.4% with an average margin of 62.5%. Thus, it can be understood that Casey’s is fundamentally strong and the share price would rise soon.

With a strong technical support at 118, the shares are trading firmly above the 50-day moving average of 116.20. The RSI reading of 53 reflects the existing bullishness in the scrip. The chart reveals that the next technical resistance exists at 125. Considering the bullishness, we can expect the share price to cross the 125 mark soon.

Casey's General Stores Stock Price: June 14th 2016

Thus, a binary trader should buy a one touch call option to capitalize on the probable uptrend in the share price. A target price of 125 or lower and an expiry date in the first week of July would increase the possibility of a successful outcome from the trade.

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