Casey’s
General Stores (CASY, $201.30): “Pizza and Gas, an
Unlikely Combination”
By: Max
Tiemann, AIM Student at Marquette University
Disclosure:
The AIM Small-Cap Equity Fund currently holds this position. This article was
written by myself, and it expresses my own opinions. I am not receiving
compensation for it, and I have no business relationship with any company whose
stock is mentioned in this article.
Summary
- Casey’s
General Stores Inc. (NASDAQ: CASY) operates gas stations and
convenience stores across the US Midwest region. The company operates
through a fuel segment (55% of revenue), a grocery and other merchandise
segment (31%), a prepared food and fountain segment (13%), and an other
segment (1%).
- The
Covid-19 pandemic forced the company lose revenue as less people were on
the roads which decreased fuel sales and foot traffic.
- To
combat the pandemic, management has been extremely focused on their growth
strategy to earn 8-10% EBITDA growth year over year.
- Growth strategies include acquiring more stores, a digital app, Casey’s branded products, and partnerships with UberEats and DoorDash
Key
points: Ever since Darren Rebelez took over
as CEO, Casey’s has aimed to have 8-10% EBITDA growth year over year. This
growth is needed due to the revenue lost from the Covid-19 pandemic. To achieve
this high growth the company has implemented a variety of strategy to
ultimately increase earnings for shareholders.
The first
growth strategy that Casey’s has implemented is store growth and acquisitions.
Since 2010, the company has increased stores by a 4.37% CAGR and currently
operates over 2,458 stores. Casey’s increases their stores by either new store
builds or through acquisitions. This past year the company acquired 178 stores
from other gas stations.
The
next growth strategy that Casey’s has implemented is partnering with UberEats
and DoorDash. This partnership allows the company to earn revenue from digital
orders and ultimately target a different customer base.
Another
growth strategy that Casey’s has implemented is introducing a digital app and
their own brand. With over 4.2 million people on the Casey’s app, the company has
been able to earn revenue from digital sales of grocery and prepared foods. On
top of that Casey’s introduced their own brand that allows them to increase
their gross margin by having a lower cost of goods sold on their branded foods.
By combining
all these strategies, Casey’s aims to earn 8-10% EBITDA growth over the coming
years.
What
has the stock done lately?
Over
the past six months, CASY is up 4.39%. This increase can be attributed to management’s
growth strategy of acquisitions and adding more stores to increase earnings. Over
the past month, CASY is up 0.61% but over the past five days the stock is down
4.52%. This displays that recently CASY has had success and their returns may
be skewed from a difficult week.
Past
Year Performance: Over the past year, CASY is down 9.74%. However,
this decrease primarily came in the beginning of the year. Over the past six
months CASY is up 4.39%, displaying that management’s growth strategy has been
effective in increasing earnings and the share price.
My
Takeaway
I believe that Casey’s General
Stores growth strategy will prove to be successful. By combining the strategies
of unit growth, digital sales, and their own brand, I think the company will be
able to grow their EBITDA and ultimately increase EPS. On top of that, I think
the Covid-19 pandemic forced Casey’s to miss out on a ton of foot traffic which
ultimately decreased revenue and their share price. As the world finally
returns to normalcy, I believe the stock price should continue to increase.
