On Friday, Evercore ISI updated its outlook on Casey's General Stores (NASDAQ:CASY) shares, increasing its price target from $370.00 to $405.00, while reiterating an Outperform rating for the stock.
This adjustment reflects the firm's confidence in Casey's strategic focus on providing quality prepared meals at competitive prices, an approach that seems particularly shrewd amid aggressive pricing by quick-service restaurant (QSR) competitors.
The analyst at Evercore ISI highlighted Casey's advantage over franchise-heavy models, noting that these competitors may face challenges in sustaining price reductions due to their relative lack of scale, which could impede efficiency.
This insight stemmed from a recent visit to the company's headquarters, where discussions included Casey's emphasis on value, flavor, and product innovation, including multiple limited-time offers and product re-launches in the prepared food segment.
Casey's General Stores is seen as a "compounder," with comparable store sales outperforming its peers, and the potential for further growth through mergers and acquisitions in a highly fragmented convenience store industry.
While acknowledging risks such as the volatility of the lower-income consumer base, wage inflation, and rising cheese costs, Evercore ISI points to Casey's experienced management and unique offerings as factors that position the company favorably in the market.
In addition to the price target increase, Evercore ISI has raised its CY25 earnings per share (EPS) forecast for Casey's by 3%, setting the new estimate at $15.30. This revision is based on the expectation of strong top-line momentum and improved fuel profit margins. Furthermore, the firm anticipates that Casey's plan to add over 100 stores in the fiscal year 2025 will likely be a conservative estimate given the robust pipeline for acquisitions.
In other recent news, Casey's General Stores has been the highlight of various analyst upgrades following a strong performance in the fourth quarter of the fiscal year 2024. Goldman Sachs, Wells Fargo, Deutsche Bank, and Benchmark have all raised their price targets for Casey's shares, maintaining positive ratings on the stock. The company reported a significant year-over-year earnings per share (EPS) increase of 56% to $2.34, surpassing the $1.70 estimate, and a net income of $502 million for the year.
These recent developments are linked to robust sales both in-store and at the gas pumps, and the company's management's effective execution during a challenging business landscape. Casey's General Stores achieved approximately 13% growth in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fiscal year 2024, exceeding both the guidance and the company's long-term strategic plan.
Casey's General Stores also announced plans to add at least 100 stores in fiscal 2025 through mergers, acquisitions, and new store constructions. Despite potential concerns about consumer spending and modest price increases in response to inflation, these recent developments indicate a commitment to continued growth.
Analysts from various firms have highlighted the company's successful strategies, including new unit growth, an expanded food service menu, and cost containment measures, positioning Casey's General Stores for continued positive performance in the upcoming fiscal year.
InvestingPro Insights
In light of Evercore ISI's optimistic perspective on Casey's General Stores, it's valuable to consider some key metrics and insights from InvestingPro that may further inform investors. The company has demonstrated a commitment to shareholder returns, having raised its dividend for an impressive 24 consecutive years. Additionally, Casey's has experienced a significant return over the last week, with a 14.59% price total return, which complements the analyst's positive outlook.
It's important to note, though, that some analysts have revised their earnings downwards for the upcoming period, which warrants caution. Despite this, the company's strong performance over longer periods remains evident, with a 71.99% price total return over the past year. With a current market cap of $13.93 billion and a P/E ratio standing at 29.7, Casey's financial health appears robust, particularly considering its ability to cover interest payments with cash flows.
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