Company Reports

Despite operating in a highly fragmented convenience store industry where competition is omnipresent and barriers to entry are minimal, Casey’s financial performance continues to be admirable. As gasoline demand in the United States has shown signs of flattening over the past decade and store operating costs continue to rise, independent convenience store operators have raised fuel margins to compensate. As a result, Casey’s has enjoyed a significant uptick in profitability as its fuel margins expanded from about 20 cents per gallon in 2019 to about 40 cents in fiscal 2024. Due to its significant size and scale relative to smaller independent convenience stores, we think the firm is poised to continue reaping the benefits of a structurally higher fuel margin environment.

Narrow-moat Casey’s General Stores delivered strong fiscal 2025 first-quarter results, as earnings per share of $4.83 outpaced our $4.30 estimate amid strong in-store margins and impressive expense control. The company continues to enjoy robust fuel profits, as margin per gallon came in at $0.41, consistent with our forecast. As independent convenience stores struggle with elevated operating costs and flattening fuel demand, we expect the industry’s breakeven fuel margin to remain higher than its prepandemic levels, allowing larger and more experienced operators like Casey’s to reap the benefits. As such, we still think the firm is poised to earn a long-term fuel margin of around $0.40 per gallon, up from its $0.19 average of 2015-19. Our long-term outlook is unchanged, but we plan to modestly raise our fair value estimate from $280 to account for better-than-expected near-term results and the time value of money.

Narrow-moat Casey’s announced the acquisition of Fikes Wholesale on July 26 for an after-tax price of $980 million. The acquisition is expected to be financed via a combination of existing cash and new debt and adds 198 convenience stores to Casey’s existing footprint (bringing its total to about 2,900 locations). The deal expands Casey’s presence outside of its core Midwestern market as about three quarters of Fikes’ stores are in Texas, with the remaining located in Florida, Mississippi, and Alabama. The deal also includes a small wholesale fuel business.

Despite operating in a highly fragmented convenience store industry where competition is omnipresent and barriers to entry minimal, Casey’s financial performance continues to be admirable. As gasoline demand in the United States has shown signs of flattening over the past decade and store operating costs continue to rise, independent convenience store operators have raised fuel margins to compensate. As a result, Casey’s has enjoyed a significant uptick in profitability as its fuel margins expanded from about 20 cents per gallon in 2019 to about 40 cents in fiscal 2024. Due to its significant size and scale relative to smaller independent convenience stores, we think the firm is poised to continue reaping the benefits of a structurally higher fuel margin environment.

We initiate coverage on Casey’s General Stores with a fair value estimate of $280 per share and a narrow economic moat rating. We think Casey’s is well-positioned to continue benefiting from a structurally higher fuel margin environment (around 40 cents per gallon) while increasing in-store comparable sales at a low- to mid-single digit pace as its attractive assortment of grocery items and prepared food allow it to take market share from small independent peers. Despite our favorable outlook, we think shares look rich and think it’s wise to wait for a more attractive entry point.

We are transitioning our coverage for Casey's General Stores and plan to publish an updated report shortly. Our report on Casey's will now utilize our quantitative ratings in conjunction with an analysis on the firm's business strategy and competitive advantage from our analyst team. The quantitative ratings are philosophically analogous to Morningstar’s proprietary, analyst-driven equity ratings. However, they are derived using advanced techniques that compare the firms to those with similar attributes from our universe of analyst-driven ratings.

Casey's General Stores CASY reported mixed third-quarter results, as same-store sale improvements across the board were met by margin pressures. The results missed Street expectations, but we are maintaining our $54 fair value estimate and our no-moat rating.

Building an economic moat as a convenience store operator is very difficult, given the heavy reliance on low-margin fuel to drive more profitable in-store sales, but we think Midwestern consolidator Casey's General Stores has the tools to continue expanding its size and market share via bolt-on acquisitions and new unit growth.

Casey's CASY stock is trading higher after the company reported second-quarter earnings that met Street expectations despite a tougher gasoline and cigarette environment. The firm was bolstered by its prepared food and fountain segment, which remains a catalyst for top- and bottom-line growth. Casey's share price remains slightly undervalued, in our view, but is within striking distance of our fair value estimate, which we maintain at $54 per share.

Casey's CASY reported first-quarter results that slightly topped Street expectations on the bottom line, which has been driving its stock price upward in early trading. Despite flat revenue growth, we remain encouraged by the firm's operating margin improvement as its product mix continues to veer toward the company's higher-margin goods. However, we believe some headwinds from commodities loom and we will be maintaining our fair value estimate of $54 per share.

Casey's CASY reported fourth-quarter results that did not meet consensus expectations on the bottom line, which has been driving its stock price downward in early trading and is now fairly valued, in our opinion. Despite flat earnings per share growth, we remain encouraged by the firm's top-line performance and potential for improvement, particularly with its in-the-store items. As a result, we will be maintaining our fair value estimate of $54 per share.

Building an economic moat as a convenience store operator is very difficult, given the heavy reliance on low-margin fuel to drive more profitable in-store sales, but we think Midwestern consolidator Casey's General Stores has the tools to continue expanding its size and market share.

We are placing Casey's CASY under review as we reassess our operating assumptions for the firm.

Building an economic moat as a convenience store operator is very difficult, given the heavy reliance on low-margin fuel to drive more profitable in-store sales, but we think Midwestern consolidator Casey's General Stores has the tools to continue expanding its size and market share.

Casey's CASY reported solid top-line results in its fiscal 2012 second quarter, though inside-the-store profit margins continue to face pressure. Ultimately, we think these pressures will continue, and inside-the-store sales may start to suffer from elevated gasoline prices. All told, we will be maintaining our fair value estimate at this time.

Building an economic moat as a convenience store operator is very difficult, given the heavy reliance on low-margin fuel to drive more profitable in-store sales, but we think Midwestern consolidator Casey's General Stores has the tools to continue expanding its size and market share.

Casey's General Stores CASY produced mixed results in its fiscal 2012 first quarter. Strong inside the store sales were offset by higher expenses, but we view these issues as cyclical in nature and not fundamental to Casey's business. Overall, Casey's results were in line with our estimates and we will be maintaining our fair value estimate.

Casey's General Stores CASY continued to drive healthy top-line growth and profitability in the fiscal 2011 fourth quarter despite rising commodity costs. We think the firm is fairly valued and we will be maintaining our fair value estimate.

Building an economic moat as a convenience store operator is very difficult, given the heavy reliance on low-margin fuel to drive more -profitable in-store sales, but we think Midwestern consolidator Casey's General Stores has the tools to continue expanding its size and market share.

Casey's General Stores CASY reported solid top-line fundamentals in its third quarter, but the healthy revenue performance did not equate to an equally strong bottom line. We are still pleased with how the firm is progressing, however, given the difficult commodity environment. We are maintaining our fair value estimate.