Casey's General Stores' recipe for growth earns new bull at BofA

As the third-largest convenience store operator in the U.S., the fifth-largest pizza chain, and the fourth-largest retailer with a liquor license, Casey’s General Stores (CASY) is well positioned to benefit from higher-margin foodservice sales. Combined with its strong Midwest footprint—an emerging hub for data center expansion— BofA Securities’ Lisa Lewandowski initiated coverage of the convenience store chain with a Buy rating.

The bullish rating and subsequent share price gain lifted Casey’s General Stores (CASY) to another all-time high.

While fuel sales generate 61% of Casey’s (CASY) sales, 70% of inside transactions did not include gas, suggesting that the store itself is a destination, Lewandowski notes, most likely for its pizza, as Casey’s may be one of the few quality food options in its mostly rural locations.

And its rural footprint gives Casey’s (CASY) a stronger market position as it is less expensive to build, buy, and operate in these locations. As well as expand. Seventy-five percent of towns between 500 to 20,000 people in its distribution center footprint do not currently have a Casey’s General Store (CASY).

In 2023, the company unveiled a 3-year strategic plan to increase store count, accelerate its foodservice operations, and enhance operational efficiencies. Accordingly, the company anticipates EBITDA growth of 8-10% annually, 500+ new stores, a mid-single-digit rise in inside same store sales, and flat to low-single-digit rise in same store fuel sales, as well as free cash flow of at least $1.25B through 2026.

“Despite low gasoline prices, muted fuel price volatility and cautious consumers, we think execution [of this strategic plan] is on track," she notes. 

Lewandowski’s Buy rating comes with a $700 price target which represents 29% upside from Thursday’s closing price.