On Friday, Evercore ISI updated its financial outlook for Casey's General Stores (NASDAQ:CASY), increasing the price target to $470 from the previous $460 while maintaining an Outperform rating on the stock.
The firm acknowledged Casey's strong second-quarter results, highlighting the company's effective earnings before interest, taxes, depreciation, and amortization (EBITDA) generation and market share gains in a challenging consumer environment.
With a market capitalization of $15.8 billion and an impressive year-to-date return of 55.79%, Casey's has demonstrated remarkable momentum. InvestingPro data shows the company maintains a "GREAT" overall financial health score of 3.05 out of 5.
Casey's reported a 4% increase in comparable store sales inside the stores, which outpaced the industry's growth by approximately 600 basis points. This performance was noted as evidence of the company's solid execution and the appeal of its differentiated prepared food offerings. The growth in sales did not come at the cost of profitability, as the inside margin saw an increase of over 100 basis points year-over-year.
This, combined with effective cost control, contributed to a higher EBIT margin. According to InvestingPro analysis, the company maintains a healthy gross profit margin of 23.36% and has shown consistent revenue growth of 2.6% over the last twelve months. For investors seeking deeper insights, InvestingPro offers 10+ additional tips and comprehensive financial metrics for Casey's.
Despite the positive results, Evercore ISI adjusted its forecast for Casey's future earnings per share (EPS). The firm lowered its fiscal year 2025 EPS estimate by 3% or $0.40 to $14.15, taking into account an increased interest expense of $10 million, one-time expenses projected in the second half of fiscal 2025, and the dilutive impact of the Fikes acquisition in the second half of 2024.
Additionally, the forecast includes a slight reduction in comparable store sales to account for the leap day in the fourth quarter of fiscal 2025, which is expected to more than offset the 45 cent beat in the second quarter and benefits from a stronger inside margin trend.
Looking ahead to fiscal year 2026, Evercore ISI predicts an EPS of $16.55, which represents a high-teens percentage growth year-over-year. This estimate assumes that the initial costs associated with the Fikes acquisition will be replaced by more than two quarters of EBITDA contributions from Fikes, estimated to be over $45 million. The firm also anticipates Casey's will capture $40-60 million in synergies over the next three to four years.
The analyst pointed out that Fikes had previously run its business in isolated segments, suggesting that integrating operations presents a significant opportunity for Casey's. The potential for reverse revenue synergy, particularly through the deployment of food operations like kiosks, was also mentioned as a positive factor.
Evercore ISI's base case valuation of $470 reflects a 27 times multiple of their calendar year 2026 EPS estimate of $17.40. The firm's outlook on Casey's is favorable, citing consistent market share gains, pricing power, and the potential for accretive mergers and acquisitions in a large, fragmented industry.
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