On Wednesday, Evercore ISI adjusted its price target for Casey's General Stores (NASDAQ:CASY), reducing it slightly from $345.00 to $342.00, while maintaining an Outperform rating on the stock. The adjustment follows the company's third-quarter financial results, which showed strong sales growth and customer traffic increases.
Casey's General Stores reported a solid increase in their inside comparable store sales by 4% and a 9.5% growth in dollar sales. Additionally, customer traffic saw a positive uptick of 2.2%, and the company experienced an expansion in inside store margin by 65 basis points, driven by its pricing power in prepared meals.
Despite the positive performance in the store's internal operations, the analyst noted that the recent rise in wholesale fuel costs has put pressure on the retail cents per gallon (CPG), dimming the shine of an otherwise robust quarter for the company's internal sales. As a result, Evercore ISI has revised downward its earnings per share estimate for Casey's by $0.10, attributing this to the anticipated lower fuel CPG in the fourth quarter, ending in April.
The firm's outlook on the 2-3 year horizon for CPG remains optimistic, anticipating an increase due to broad-based inflationary pressures. The Base Case valuation for Casey's has been adjusted to $342, using a 23 times price-to-earnings (P/E) ratio. This adjustment accounts for the current fuel profit landscape but also factors in potential gains from market share, merger and acquisition opportunities, and the company's pricing power in prepared meals.
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