Store Expansion And Digital Platform Upgrades Will Shape Future Markets

Key Takeaways

• Growth driven by store expansion, focus on rural markets, and innovation in high-margin prepared foods aligns with consumer trends and supports higher revenue and margins.
  
• Investments in digital strategy, supply chain efficiency, and store remodels enhance operating leverage and set the stage for sustained earnings growth.
  
• Heavy reliance on acquisitions, regional and labor risks, weak digital presence, and declining fuel demand pose challenges to future revenue growth and margin expansion.

Catalysts

Operates convenience stores under the Casey's and Casey’s General Store names in the United States.

• Continued store expansion, including integration of the Fikes/CEFCO acquisition and plans for ongoing new unit growth in underpenetrated rural and Midwestern markets, positions Casey's to leverage population influx to these regions and drive sustained top-line revenue growth.
  
• Ongoing momentum in prepared foods, bakery, and private label offerings-with high gross margins and innovation through LTOs-capitalizes on shifting consumer preferences for convenient meal solutions, supporting both revenue and net margin expansion.
  
• Strategic investments in digital platforms (nearly 9.5 million Rewards members, personalized promotions), analytics, and targeted guest engagement lay the groundwork for higher frequency, bigger basket sizes, and incremental revenue, as digital adoption rises in convenience retail.
  
• Supply chain and procurement improvements (Fuel 3.0, self-distribution, vendor partnership funding on promotions) continue to lower cost of goods sold and optimize operating expenses, driving enhanced operating margins and earnings leverage.
  
• Progress toward converting and remodeling acquired stores for Casey's full food/kitchen model creates a future catalyst for gross margin expansion and synergy capture, with expected benefits becoming more pronounced in the following fiscal year and supporting multi-year EPS growth.

Casey's General Stores Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Casey's General Stores's revenue will grow by 6.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.5% today to 3.9% in 3 years time.
• Analysts expect earnings to reach $760.7 million (and earnings per share of $20.72) by about September 2028, up from $581.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.6x on those 2028 earnings, down from 34.6x today. This future PE is greater than the current PE for the US Consumer Retailing industry at 21.7x.
• Analysts expect the number of shares outstanding to grow by 0.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.98%, as per the Simply Wall St company report.

Casey's General Stores Future Earnings Per Share Growth

Risks

• The company's long-term growth strategy is heavily reliant on successful integration and operational improvement of recently acquired stores (like CEFCO/Fikes), but significant prepared foods synergy and margin gains will not materialize for at least another year, which could create drag on net margins and delay expected earnings leverage.
  
• Casey's remains concentrated in the Midwest and Texas, exposing it to higher risk from regional economic shifts, demographic trends such as rural population decline or aging, and unfavorable weather events, all of which may cause volatility in same-store sales and earnings.
  
• The company's fuel sales drive significant in-store traffic and overall revenue, yet long-term secular trends like EV adoption and decreased gasoline demand threaten to reduce both fuel volume and in-store customer visits, potentially eroding revenue growth.
  
• While digital and mobile capabilities are being developed, Casey's lags many national QSRs and large convenience store peers in overall digital transformation and geographic scale, risking future market share and hindering revenue growth if this gap persists.
  
• Rising labor costs and persistent labor shortages present ongoing risks to operating margins, especially as Casey's expands its store base and remodels locations, potentially leading to higher expenses and margin pressure across the business.

Valuation

• The analysts have a consensus price target of $564.333 for Casey's General Stores based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $600.0, and the most bearish reporting a price target of just $490.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $19.5 billion, earnings will come to $760.7 million, and it would be trading on a PE ratio of 33.6x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $541.3, the analyst price target of $564.33 is 4.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.