Alimentation Couche-Tard Inc. posted a sharp increase in fuel profits during its fiscal fourth quarter, driven by soaring margins after the Middle East conflict sent gasoline and diesel prices higher, even as road transportation fuel volumes declined in the U.S. and Europe.
Revenue and Earnings Beat Estimates
The Canadian convenience store and gas station operator, which owns the Circle K brand, reported revenue of US$19.5 billion for the quarter ended April 26, a 20 percent jump from the same period last year and US$750 million more than analysts had forecast, according to Bloomberg data.
On an adjusted basis, Couche-Tard earned 73 cents per share, crushing the average analyst estimate of 54 cents in a Bloomberg survey.
Fuel Volumes Drop as Prices Rise
Consumers drove less in response to higher pump prices. Same-store road transportation fuel volumes fell 2.1 percent in the U.S. and 4.4 percent in Europe and other regions. In contrast, volumes rose 2 percent in Canada.
Gasoline and diesel prices spiked after the U.S. and Israel attacked Iran beginning in late February, and Iran retaliated by largely closing the Strait of Hormuz to shipping traffic.
Fuel Margins Surge in Key Markets
In the U.S., Couche-Tard’s most important market, fuel gross margin reached 52.44 cents per gallon, an increase of more than 9 cents from a year earlier. The average selling price of fuel at company-operated U.S. stores was US$3.60 per gallon during the quarter.
“This quarter highlighted the earnings power of the model in a volatile fuel environment, with outsized fuel margin capture more than offsetting softer fuel volumes,” Raymond James analyst Bobby Griffin said in a note.
Stock Performance and Market Context
Couche-Tard’s stock has risen about 10 percent this year, giving it a market capitalization of more than $75 billion. Shares of rival Casey’s General Stores Inc. soared more than 20 percent on June 10 after it also reported earnings that topped estimates.
