Company Reports

Casey’s strategy is anchored in its hybrid model as a rural grocer, gas station, and quick-service restaurant, and we believe the firm is well-positioned to defend its edge amid rising competitive intensity. With nearly 3,000 stores, over 70% in towns under 20,000 residents, Casey’s enjoys geographic insulation that national chains find uneconomical to replicate. We think this entrenched rural footprint provides durable utility, allowing Casey’s to serve as both an essential local staple and the nation’s fifth-largest pizza chain.

Casey's hybrid model combines rural fuel, merchandise, and foodservice across nearly 3,000 US stores. Its dense Midwest footprint and vertically integrated supply chain unlock attractive store economics, while its position as the nation's fifth-largest pizza chain helps drive incremental traffic.

We will discontinue analyst coverage of Casey’s General Stores on or about May 30. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

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 delivered strong fiscal 2025 third-quarter results as continued growth in fuel gallons sold and in-store sales helped the firm offset elevated integration costs associated with the acquisition of Fikes. As such, EPS of $2.33 was consistent with the prior year and comfortably outpaced our $1.85 estimate. We plan to raise our $295 fair value estimate by around a mid-single-digit percentage due to the better-than-expected results, and we anticipate increasing our fiscal 2025 forecast for fuel gallons sold to about 3.2 billion (from 3.1 billion).

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.

We plan to raise our $285 fair value estimate on narrow-moat Casey's General Stores by a low- to mid-single-digit percentage following the firm's strong fiscal 2025 second-quarter results. Earnings per share of $4.85 surpassed our $4.40 estimate due to continued improvement in the firm's in-store gross margin and diligent operating expense control. Although fuel margin per gallon of $0.40 came in slightly below our $0.41 estimate, we don't plan to lower our fiscal 2025 forecast for a fuel margin of about $0.40 significantly. Indeed, longer term, we still think Casey's should enjoy structurally higher fuel profits —we model per-gallon margins in the low $0.40 range as opposed to roughly $0.20 prepandemic—as inflationary cost pressures and flattening fuel demand have driven a steep uptick in industrywide breakeven margins for sub-scale independent operators. Moreover, we expect gradual industry consolidation to continue given that nearly two thirds of the nation's 150,000 convenience stores are still owned by operators with 10 or fewer stores.

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.