On Wednesday, Evercore ISI updated its financial outlook for Casey's General Stores (NASDAQ:CASY), increasing the price target from $435.00 to $440.00. The firm maintained an Outperform rating on the stock. The adjustment follows an Investor Day event that provided Evercore ISI with a clearer understanding of the company's strategies for achieving its EBITDA growth target of 8-10%.
Casey's General Stores, recognized as the nation's fifth-largest pizza kitchen, is focusing on delivering both taste and value. The company's approach includes a culinary innovation center and a detailed process to ensure continuous product novelty and innovation.
Evercore ISI notes that Casey's is also looking at small to mid-sized mergers and acquisitions, which could contribute to a 4% unit growth. These acquisitions are considered attractive as they are potentially accretive, with purchase prices ranging between 6-9 times EBITDA compared to Casey's own EBITDA multiple of 12 times.
The firm also identified several margin levers that could support or improve the same-store EBITDA rate. These include the introduction of private label tiering, joint business planning, and ongoing innovation. Despite potential risks such as reduced consumer spending, election uncertainty, and volatile commodity prices, specifically cheese, Evercore ISI believes Casey's is well-equipped to manage these challenges.
The updated price target is based on the higher end of Casey's historical EBITDA valuation range, which spans from 10 to 13 times. Evercore ISI's revised Base Case assumes a roll to fiscal year 2026 EBITDA using this valuation range. The firm's commentary reflects confidence in Casey's ability to sustain its growth and financial performance in the face of potential market uncertainties.
In other recent news, Casey's General Stores has been the subject of attention from both financial results and analyst perspectives. The company has seen a steady increase in key financial metrics for the first quarter of the fiscal year 2025. Diluted earnings per share rose by 7% to $4.83, while net income increased by 6% to $180 million. EBITDA also saw a 9% improvement, reaching $346 million. In-store sales grew by 2.3%, with fuel same-store gallons sold witnessing a slight increase of 0.7%.
On the other hand, JPMorgan (NYSE:JPM) has adjusted its stance on Casey's General Stores, downgrading the stock from Neutral to Underweight. The firm cited rising cheese costs, which are expected to impact the company's Prepared Foods margins, as a significant concern. Despite these challenges, Casey's General Stores has shown resilience in its merchandise business and has managed to control costs effectively.
These developments have been recent, with the company also announcing its acquisition of Fikes, including 198 CEFCO convenience stores. This acquisition, expected to close at a net purchase price of $980 million, represents a key growth strategy for the company.
InvestingPro Insights
Casey's General Stores' strong market position and growth strategies are reflected in recent InvestingPro data. The company's market capitalization stands at $14.45 billion, with a P/E ratio of 28.43, indicating investor confidence in its future earnings potential. This aligns with Evercore ISI's optimistic outlook and increased price target.
InvestingPro Tips highlight Casey's financial strength and shareholder-friendly policies. The company has raised its dividend for 25 consecutive years and maintained payments for 35 years, demonstrating a commitment to returning value to shareholders. This consistent dividend growth, coupled with a 16.28% dividend growth rate in the last twelve months, supports the company's attractiveness to income-focused investors.
Moreover, Casey's strong financial performance is evident in its 4.01% revenue growth and 14.16% EBITDA growth over the last twelve months. These figures support Evercore ISI's confidence in Casey's ability to achieve its 8-10% EBITDA growth target.
For investors seeking a deeper understanding of Casey's potential, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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