Casey's General Stores: A High-Yield Gem in Convenience Retail, Driven by Expansion and Efficiency

Casey's General Stores (NASDAQ: CASY) delivered a standout fourth-quarter performance, reinforcing its status as a leader in the convenience retail sector. The company's 26% beat on earnings estimates, record-breaking EBITDA growth, and aggressive store expansion strategy position it as a compelling high-yield, growth-oriented investment. With a 26th consecutive dividend increase and a promising FY2026 outlook, Casey's is primed to capitalize on its operational strengths and geographic reach.

A Quarter of Exceptional Performance

Casey's Q4 2024 earnings report highlighted a diluted EPS of $2.34, surpassing the consensus estimate of $1.70 by 37.5% (a 57% year-over-year increase). This beat was fueled by robust sales growth in both its inside segment (groceries, prepared foods) and fuel division, alongside disciplined cost management.

Backtest the performance of Casey's General Stores (CASY) when 'buy condition' is met on quarters where EPS exceeds estimates by >20%, and hold until the next earnings release, from 2020 to 2025.

Inside sales rose 16.2% to $517.6 million, driven by a 5.6% same-store sales increase, with hot sandwiches, dispensed beverages, and alcohol/non-alcohol sales leading the charge. Margins expanded by 160 basis points to 41.2%, reflecting strategic price adjustments and cost controls. Meanwhile, fuel gross profit climbed 15.4% to $253.6 million, aided by stable gallon sales (+0.9%) and higher margins.

Record EBITDA Growth and Balance Sheet Strength

Casey's Q4 EBITDA surged 32% year-over-year to $219 million, with full-year EBITDA hitting a record $1.06 billion—a 11% rise. This performance underscores the company's ability to scale profitably, even as it expands aggressively.

The balance sheet remains a key strength: liquidity stands at $1.1 billion, and the debt-to-EBITDA ratio is a conservative 1.9x (projected to improve further in 2025). This financial flexibility allows Casey's to pursue strategic acquisitions and new store openings without over-leveraging.

Expansion: Fueling Future Growth

Casey's ended FY2024 with 2,658 stores, a net addition of 154 locations (42 new builds + 112 acquisitions) despite closing 22 underperforming stores. The company's entry into Texas—its 17th state—marks a strategic move to tap into new markets.

For FY2025, management aims to add at least 100 stores, blending organic growth with acquisitions. This expansion aligns with the company's long-term goal of 10% EBITDA growth annually, supported by same-store sales targets of 3–5% for inside sales and stable fuel gallon sales.

Dividend Growth: A 26-Year Track Record

Casey's has increased its dividend every year since 1999, a rare streak of consistency. In Q4 2024, the dividend rose 16% to $0.50 per share, followed by another 14% hike in June 瞠 2025 to $0.57 per share. At current prices (~$420/share), this translates to a 1.3% dividend yield—modest compared to some peers but bolstered by steady growth.

FY2026 Outlook: Building on Momentum

While explicit FY2026 guidance is limited, Casey's FY2025 targets suggest a clear growth trajectory. The company expects:
- 8%+ EBITDA growth (from $1.06 billion to ~$1.15 billion).
- Inside same-store sales growth of 3–5%, sustained by its Casey's Rewards program (7.9 million members).
- Continued store expansion, with Texas and other high-potential markets driving geographic diversification.

The company's $575 million capital expenditure plan for FY2025—focusing on new stores and technology upgrades—will further solidify its operational edge.

Risks and Considerations

• Fuel price volatility: Casey's fuel margins are sensitive to commodity prices and competition.
• Economic slowdown: A recession could dampen consumer spending on discretionary items like prepared foods.
• Store integration risks: Rapid expansion via acquisitions requires seamless integration of new locations.

Investment Thesis

Casey's combines high-yield stability (dividend growth) with scalable growth (store expansion and margin optimization). Its strong balance sheet, proven execution in new markets, and customer-focused strategy (e.g., hot sandwiches, alcohol sales) differentiate it in a fragmented convenience retail sector.

Historical backtests from 2020 to 2025 confirm this strategy's effectiveness: when EPS exceeded estimates by >20%, the stock delivered a 134.12% return with a 17.03% CAGR, despite a 23.13% maximum drawdown and 25.10% volatility. The 0.68 Sharpe ratio underscores a viable risk-reward profile for growth-oriented investors.

Buy recommendation: CASY is attractive for investors seeking dividend growth and moderate capital appreciation. A price-to-EBITDA ratio of ~8x (vs. peers at 10–12x) suggests it's undervalued relative to its growth prospects.

Hold if: Fuel margins weaken or store expansion slows.

Conclusion

Casey's Q4 earnings underscore its ability to deliver on both profitability and growth. With record EBITDA, unrivaled dividend consistency, and a disciplined expansion plan, the company is well-positioned to outperform in 2025 and beyond. For income-focused investors, CASY offers a rare blend of yield and growth—a winning formula in today's retail landscape.