On Wednesday, Goldman Sachs (NYSE:GS) updated its outlook on Casey's General Stores (NASDAQ:CASY), increasing the price target to $280 from $263 while keeping a Neutral rating on the stock.
The adjustment follows Casey's General Stores' third fiscal quarter report, which presented a notable earnings per share (EPS) beat at $2.33, compared to the consensus estimate of $2.14. The performance surge was attributed to a robust 4.1% growth in same-store sales (SSS), particularly within the prepared food and dispensed beverage segments, which saw a 7.5% rise.
Despite the positive results in inside sales, Casey's General Stores experienced softer outcomes in its fuel segment. The fuel margins reported for the third fiscal quarter were 37.3 cents per gallon (CPG), falling short of the anticipated 39.0/38.5 CPG. Additionally, same-store fuel gallons sold decreased by approximately 0.4% year-over-year. The company has observed a downward trend in fuel margins into the fourth fiscal quarter, with February margins slightly below the mid-30's CPG range.
Management at Casey's General Stores has decided to maintain its full-year 2024 outlook, which includes an EBITDA growth target of 8-10%. However, achieving this goal may present challenges, as it implies an EBITDA growth of around 22% for the fourth quarter, factoring in the deceleration of fuel margins. In light of the third fiscal quarter beat, Goldman Sachs has raised its EPS estimates for fiscal years 2024 and 2025, which contributed to the revised price target.
Casey's General Stores is recognized for its exceptional prepared foods business, company-owned and operated self-distribution model, and its distinctive presence in predominantly rural areas of the Midwest. Goldman Sachs acknowledges the company as a top-tier convenience store operator. However, the firm suggests that the current stock price already reflects these strengths, leading to a more balanced risk-reward scenario, hence the decision to maintain a Neutral rating.
InvestingPro Insights
Casey's General Stores (NASDAQ:CASY) has demonstrated resilience in its prepared foods segment, a key driver of the company's recent earnings beat. To provide a more comprehensive view of the company's financial health and future prospects, let's consider some key metrics from InvestingPro and valuable InvestingPro Tips.
InvestingPro Data shows that Casey's has a market capitalization of $10.88 billion, with a P/E ratio of 23.05, reflecting investor confidence in the company's earnings potential. The company's revenue for the last twelve months as of Q3 2024 stands at approximately $14.59 billion, although it has experienced a slight decline in revenue growth of -4.16% during the same period. Furthermore, the dividend yield as of the latest data point is 0.58%, with a notable dividend growth of 13.16%.
Delving into InvestingPro Tips, it's noteworthy that Casey's has raised its dividend for an impressive 24 consecutive years, underscoring its commitment to returning value to shareholders. Additionally, the company has maintained dividend payments for 35 consecutive years, which speaks to its financial stability and reliability. These aspects are particularly relevant for investors looking for consistent income through dividends. On the flip side, it's important to be aware that three analysts have revised their earnings estimates downwards for the upcoming period, and the company is trading at a high P/E ratio relative to near-term earnings growth. This could signal caution for investors banking on continued rapid growth in earnings.
For those interested in a deeper analysis, there are additional InvestingPro Tips available that shed light on Casey's moderate level of debt, profitability over the last twelve months, and strong returns over the last decade. To explore these insights further and make informed investment decisions, visit InvestingPro for comprehensive data and analysis. Plus, you can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a total of 10 InvestingPro Tips for Casey's General Stores.
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