Casey’s General Stores Inc. (CASY) is a midwest retailer that operates more than 2,200 convenience stores in 16 states.  The stores provide self-service gasoline, grocery markets items and a selection of freshly prepared foods including made-from-scratch pizzas, donuts, subs and sandwiches. 

The first CASY store opened in Boone, Iowa, in 1968. According to the Ankeny, Iowa-headquartered company, the majority of its stores are based in smaller localities: Approximately 57% of CASY stores are in areas with populations of 5,000 or less while roughly 17% of stores can be found in areas with populations of 20,000 or more. 

In November, CASY dramatically expanded its footprint with a $580 million all-cash acquisition of Buchanan Energy, owner of Bucky’s Convenience Stores, which operates 94 retail stores and 79 dealer locations, primarily in Illinois and Nebraska. Darren Rebelez, CASY president and CEO, announced the acquisition by stating, “We’ve been hard at work executing on our strategic vision to reinvent the guest experience; creating efficiencies to improve the shape of our business and to fund future growth; and accelerating our new store builds and acquisitions. Adding Bucky’s to the Casey’s family is aligned with our strategy.”

Here’s how our proprietary POWR Ratings system evaluates CASY:

Trade Grade: B

CASY stock is trading at $177.44, which is closer to its 52-week high of $196.57 than its 52-week low of $114.01. As with the rest of the market, the stock tumbled in March as the coronavirus pandemic crippled the economy, but it has steadily recovered.  

The company has had an impressive year; in September 2020, CASY reported positive Q1 earnings data, in November with the Bucky’s acquisition, and in December with its mostly solid Q2 earnings report.

The Q2 data was impressive: Net income of $111.9 million, up from $81.9 million in Q2 2020, and Adjusted EBITDA of $223.2 million, up from $184.4 million one year earlier. The Q2 dividend of $0.34 per share marked an increase of 6% and the diluted earnings per share of $3.00 was a 36% spike from the $2.21 for the same period one year earlier.

In-store sales in Q2 were substantial: roughly $1 billion, up from $958.4 million in Q2 2020. However, operating expenses for the quarter were also up – the company attributed that to having 38 more stores from one year earlier – while same-store fuel gallon sales were down year-over-year due to lower guest traffic due during the pandemic, although sales were up from the previous quarter. Only three CASY stores were forced to shut down during the pandemic’s economic tumult.

Buy and Hold Grade: B

The stock’s proximity to its 52-week high is a key factor that our Buy & Hold Grade considers, and CASY has been progressing in admirable performance in recent weeks. Rebelez signaled a full-steam-ahead approach with the Q2 earnings, observing, “The Board’s decision to raise the dividend is a sign of continuing confidence in the Company’s ability to achieve strong financial results and maintain our already excellent financial flexibility in both the short and long term.”

Peer Grade: C

CASY ranks #7 of out of 23 in the Grocery/Big Box Retailers category and is the highest ranked U.S. regional retailer in that mix. The competition in the category is formidable – the top three spots are held by Costco (COST), Target (TGT) and Dollar General (DG) – so CASY’s peer grade is hardly a reflection on its distinctive qualities.

Industry Rank: B

The Grocery/Big Box Retailers category ranks #35 out of 123 stock categories and has an average POWR Rating of “B.”

Overall POWR Rating: B (Buy)

CASY’s stock has checked all the right boxes and its standing amid national competition has earned it a “B” rating.

Bottom Line

While Midwest consumers have long taken advantage of CASY stores, the wider geographic spectrum of investors should pay attention to this retailer, which rarely gets the national attention it deserves. CASY is well positioned to move forward into 2021 and should be added to your watchlist.

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CASY shares were trading at $176.61 per share on Tuesday morning, down $0.83 (-0.47%). Year-to-date, CASY has declined -1.13%, versus a -1.14% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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