On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted the price target for Casey's General Stores (NASDAQ:CASY), reducing it to $337 from the previous $344 while maintaining a Buy rating on the stock. The revision follows Casey's third-quarter earnings report, which surpassed consensus expectations on earnings per share (EPS) by 9%.
The company's robust performance was attributed to strong same-store sales (SSS) growth and margins within its inside-store operations, as well as effectively controlled operating expenses.
Casey's General Stores has demonstrated the strength of its business model, particularly through its prepared food segment. The company has seen significant growth in its pizza sales, which increased by 11%, outpacing the top three pizza chains that only saw a 2.5% rise.
This performance, along with gains in bakery and dispensed beverage sales, underscores Casey's ability to offer value to cost-conscious consumers. The analyst pointed out that Casey's value meal solutions are expected to continue driving inside-store results and help the company gain market share from quick-service restaurants (QSRs).
Despite the positive aspects of the third-quarter results, there were concerns over weaker fuel profitability during the quarter and in February. Additionally, operating expense growth is anticipated to be in the low double-digits in the fourth quarter due to timing shifts in expenses.
Nevertheless, Deutsche Bank remains optimistic about Casey's prospects. The firm highlighted several key points, including the appeal of Casey's prepared food as a quality, affordable alternative to QSRs, the company's unit growth trajectory aiming for 350 new stores by 2026, improvements in in-store efficiencies leading to reduced labor hours, and the potential to capitalize on its loyalty platform.
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