CORPUS CHRISTI, Texas -- Shares of Susser Holdings Corp. sank Tuesday as oil prices spiked to new records and an analyst slashed his estimates on the convenience store operator. And Friedman Billings Ramsey downgraded Casey's General Stores Inc. to "underperform" from "market perform" as it expects rising fuel prices and input costs to hurt the retailer in the financial-year 2009, causing shares to dip.
John Lawrence of Morgan Keegan & Co. said in a note that he is impressed with recent merchandising initiatives at Susser after attending the company's analyst day, reported the Associated [image-nocss] Press. He said he expects Susser to post strong margins and same-store sales, or sales in stores open at least a year, a key retailer metric; however, he now expects Susser to earn 40 cents per share this year, less than half his prior estimate of 98 cents per share, reflecting a worse-than-expected loss in the first quarter, higher estimated costs and slightly lower fuel margins.
On average, three analysts surveyed by Thomson Financial expect the company to earn 71 cents per share this year, with estimates ranging between 38 cents and 98 cents per share.
"Despite our reduced estimates, we continue to view Susser as a well-positioned [convenience] store operator given a strong regional economy and synergies with T&C," the analyst wrote. He reiterated an "outperform" rating on the stock.
The analyst reduced his targets the same day oil rose to above $129 a barrel and a government report showed wholesale prices outside of food and energy rose 0.4%—double what analysts expected. In afternoon trading, Susser shares fell 84 cents, or 5.5%, to $14.57, said AP.
The Corpus Christi, Texas-based company operates more than 505 c-stores in Texas, New Mexico and Oklahoma under the Stripes and Town & Country banners. It provides restaurant service at more than half of its locations and also supplies branded motor fuel to over 380 independent dealers through its wholesale fuel division.
Separately, FBR downgraded Ankeny, Iowa-based Casey's to "underperform" from "market perform" as it expects rising fuel prices and input costs to hurt the retailer in the financial-year 2009, sending the company's shares down 9%, reported Reuters.
The brokerage expects the company, whose c-stores sell gasoline in addition to prepared food, tobacco, beverage and health products, to face weak gasoline comparable-store sales throughout the year ending April 30, 2009.
Friedman Billings Ramsey also expects the retailer's fiscal-year 2009 profit to take a blow from rising input costs and higher credit-card fees.
Rising dairy and wheat costs may drag down margins of Casey's prepared foods segment, which is expected to roll out a made-to-order Casey sub as well as an expanded coffee offering in the next financial year.
"We believe Casey's will face several headwinds in the fiscal-year 2009, and while these headwinds are almost entirely beyond management's control, we believe earnings will be negatively impacted," FBR analyst Karen Short said in a note to clients cited by Reuters.
Short, however, expects Casey's gasoline sales at stores open more than a year to recover as public transportation in its markets is limited and customers would have to resort to own vehicles or other options.
Short, who cut her price target on the retailer to $21, said even with slightly higher-than-normal margins in fiscal 2009, she sees a fall in profit.
The company's self-service gasoline contributed to 73.3% of sales in fiscal 2007, according to FBR.
Shares of the company fell to a low of $20.98, before paring some of their losses to trade down $1.66 at $21.29 Tuesday morning on Nasdaq, said the news agency.
The retailer operates its stores in nine Midwest states, including Iowa, Missouri and Illinois.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.