Casey's General Stores Food Comp Fears Come True In Q1

Jefferies retained its Hold rating on Casey's General Stores Inc CASY despite reporting a first quarter EPS miss due to a weak top line and disappointing gross margins.

The quarterly EPS was $1.70 versus Jefferies' $1.75 and consensus' $1.81 estimate. Due to softening in foodservice traffic trends, the prepared food comps of 5.1 percent came in below Jefferies' 8.6 percent and consensus' 9.7 percent.

"Notably and as we had expected, prep foods comps missed the Street; however, the size of the shortfall even surprised us," analyst Christopher Mandeville wrote in a note.

Despite solid opex control, EBITDA came in soft at $157 million versus Jefferies' and consensus view of $164 million and $167 million, respectively.

The company maintained its fiscal 2017 outlook. The goal for fiscal 2017 is to increase prepared food and fountain same-store sales 10.2 percent with an average margin of 62.5 percent.

"With guidance being maintained, this implies a meaningful reacceleration in sales trends for the rest of the yr. (far greater than our current ests.)," Mandeville noted.

At time of writing, shares of Casey's plunged 10.39 percent to $119.46, while Jefferies has a target price of $137.