ANKENY, Iowa -- In spite of relatively decent second-quarter same-store sales, the shares of Casey's General Stores lost over 22% in December, according to a report from iStockAnalyst.com.
However, the stock still has strong upside potential, and most experts are looking for a recovery to begin soon, according to the report.
Casey's General Stores Inc., the operator of more than 1,400 convenience store, recently delivered a strong fiscal second quarter amid the deepening recession. For the quarter ended Oct. 31, the Ankeny, Iowa-based company reported net income of $27.3 [image-nocss] million, or 54 cents a share, compared with net income of $27.7 million, or 54 cents a share, in the year-earlier period. Revenue climbed 17% to $1.39 billion, from $1.19 billion.
However, it was the same-store sales figures, a key measure of retailer's performance that caught analyst's attention. Same-store gallons sold, or gasoline sold at stores open for at least one year, rose by 0.2% in the second quarter. The company said that it was pretty encouraged by improved same-store gallons sold in the backdrop of significant decline in the average retail price. Grocery and other merchandise same-store sales climbed 4.9%, while prepared food and fountain drinks same-store sales jumped 9.3%.
Morgan Keegan analyst John R. Lawrence upgraded shares of Casey's to "outperform" from "market perform" in December, citing "healthy same-store sales, easing sales comparisons, cost tailwinds and strong operating cash flow projections."
Lawrence said in a research note to clients that the company stands to benefit from cash-squeezed consumers trading down to convenience stores for items, rather than shopping in premium stores. He added that the recent pullback in stock prices is unjustified, given Casey's strong same-store sales, but creates an attractive entry point for investors.
The stock also looks quite promising as Casey's offers a dividend yield of 1.32%, which exceeds the industry average as most of the peers don't pay dividend at all. Shares of the company fell 18 cents or 0.79% to $22.59 in afternoon trade on Friday.
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