Casey‘s General Stores Inc: Cooking Up A Solid Growth Story

Research evidence excerpt

Casey‘s General Stores Inc: Cooking Up A Solid Growth Story

Casey's General Stores Inc UBS Research

Casey's new 3 year financial plan centers around scaling its successful playbook

to drive 8-10% annual EBITDA growth. Its EBITDA growth target builds in balanced

growth contributions from existing stores and new unit growth (4%+ from each). CASY

is targeting 400 new stores, through a mix of new build and M&A. Within its existing

stores, its algorithm calls for MSD inside SSS growth and roughly flat same-store gallons.

Both metrics imply share gains. Further, it seeks to grow its inside gross margin over the

period, and models a mid-40s cents per gallon (CPG) fuel margin. Casey's algorithm

factors in EBITDA growth outpacing its opex growth, driving operating leverage. Much

of its new plan is consistent with its prior framework, including 8-10% EBITDA growth, a

~4% new unit CAGR, MSD inside SSS, inside gross margin expansion, and opex

leverage. Its new plan takes a slightly more conservative view on fuel gallons (~flat),

versus its prior plan targeting flat-to-LSD SS gallon growth. On the other hand, its mid-

40s CPG fuel margin model is quite a bit higher than the mid-30s level it previously

pointed to. Lastly, CASY targets generating ~$2 b in free cash flow over the period. On

this front, the company acknowledged it is likely to generate FCF faster than it can

deploy it, and will likely turn to share repurchases more often to return cash to

shareholders. It aims to maintain a dividend consistent with an annual payout ratio of

15-20%.

The company aims to lean into its differentiated, kitchen-led food offering to

drive trip occasions & greater share of wallet. Throughout the event, Casey's

emphasized its differentiated combination of convenience store and quick service