Casey’s General Stores has spent much of the last few years building a business that looks increasingly different from the traditional gas station. Pizza, prepared food, and a growing rewards program have helped make the convenience retailer a destination even when customers are not filling up.
The company operates nearly 3,000 stores across 19 states and has roughly 11 million Casey’s Rewards members.
That momentum did not spare the stock after its latest earnings report. Casey’s General Stores (CASY) shares dropped roughly 14% following fiscal first-quarter results, even as earnings and EBITDA posted double-digit growth. Bank of America thinks the selloff has created an opportunity.
Bank of America analyst Lisa K. Lewandowski reiterated a Buy rating on Casey’s in a note given to TheStreet, although she lowered the firm’s price objective to $875 from $975. The new target still implies about 39% upside from the $629.03 share price listed in the Sept. 9 note.
The lower target reflects what BofA described as near-term remodeling noise, a cautious U.S. consumer, and a recent re-rating across convenience-store stocks. Still, the firm called Casey’s a top-tier operator and said the company’s underlying growth trends remain solid.
Casey’s earnings give BofA reasons to stay bullish
Casey’s reported fiscal first-quarter diluted earnings of $7.37 per share, up 27.7% from a year earlier. Net income climbed 27.1% to $273.7 million, while EBITDA increased 17.1% to $485.1 million. Inside same-store sales rose 3.2%, with the company posting a 42.2% inside margin.
Fuel was another bright spot for profits. Same-store gallons sold declined 0.3%, but fuel gross profit increased 19.6% to $446.9 million as Casey’s generated a fuel margin of 47.8 cents per gallon.
The company left its fiscal 2027 outlook unchanged. Casey’s still expects inside same-store sales growth of 2% to 5%, an inside margin above 42%, and EBITDA growth of 8% to 10%. It also expects to open at least 120 stores through acquisitions and new construction.
More Gas Station Stocks
- Pain at the gas pump rises as Middle East violence worsens
- Gas station giant gives up on 471 stores
- August sees a dubious record on gasoline prices
For BofA, one of the biggest near-term pressure points is also part of the long-term opportunity. Casey’s is converting acquired CEFCO stores, and some locations need to close for roughly four to six weeks while kitchens and other upgrades are installed.
BofA estimates the remodeling work reduced first-quarter inside same-store sales by about 25 basis points and fuel sales by about 50 basis points. The analyst expects that drag to continue through the fiscal third quarter.
The payoff could be meaningful once those stores reopen. BofA said remodeled locations typically see sales rise about 30% from prior levels, with many gaining foodservice capabilities for the first time. Casey’s ended the first quarter with 2,959 stores after adding 21 locations and closing or divesting six during the quarter.
Cheng Xin / Getty Images
BofA sees foodservice supporting Casey’s growth
Prepared food remains an important part of the bull case. Casey’s has been pushing deeper into higher-margin foodservice, including whole pizzas and chicken wings, while expanding its rewards program and converting more acquired stores to the Casey’s format.
The company’s new three-year strategic plan calls for continued expansion of food and beverages, store growth, and greater operating efficiency. Casey’s said in June that it had added more than 500 stores under its previous three-year plan before laying out its next phase of growth.
BofA also raised its earnings estimates despite cutting the price target. The firm now forecasts EPS of $21.77 in fiscal 2027, $24.06 in fiscal 2028, and $26.64 in fiscal 2029, all slightly above its previous estimates.
Lewandowski’s $875 target is based on 18.9 times projected fiscal 2028 enterprise value to EBITDA. That is a premium to convenience-store peers, but BofA argues Casey’s deserves it because of its geographic footprint, logistics network, cost controls, and exposure to higher-margin foodservice.
For investors, BofA has become more conservative on how much it is willing to pay for Casey’s shares even as its expectations for the underlying business have edged higher. The stock’s sharp post-earnings decline has widened the gap between its current price and the firm’s new target.
Related: 74-year-old convenience store chain closing all locations
