Casey's General Stores (CASY): A Scalable Convenience Retail Leader Poised for Continued Outperformance

Casey's General Stores (NASDAQ: CASY) delivered yet another quarter of exceptional financial performance, with its Q4 2025 earnings handily beating analyst expectations on both top- and bottom-line metrics. The company's diluted EPS of $2.63 surpassed the consensus estimate of $2.01, while revenue of $3.99 billion narrowly outperformed the $3.97 billion forecast. This latest beat reinforces CASY's reputation as a “beat-and-raise” juggernaut in the convenience store sector, with its scalable growth model, disciplined capital allocation, and resilient demand drivers positioning it as a top pick for investors.

Key Highlights from Q4 Earnings

• EPS Growth: Up 12% year-over-year to $2.63, reflecting margin expansion and operational efficiency.
• Revenue Momentum: 10.9% growth from Q4 2024's $3.60 billion, driven by inside sales growth (+1.7% same-store sales) and fuel demand.
• Dividend Hike: A 16% increase to $0.50 per share, marking the 25th consecutive annual dividend boost.
• Balance Sheet Strength: $1.2 billion in liquidity and a debt-to-EBITDA ratio of 1.9x, enabling aggressive store expansion.

Driving Forces Behind the Outperformance

1. Inside Sales Resilience
Casey's continues to capitalize on the convenience retail trend of “grocery-to-go” demand. Q4 inside sales rose 1.7% in same-store terms, with a two-year stack growth of 4.3%, as customers increasingly rely on Casey's for fresh groceries, prepared foods, and beverages. The inside margin expanded to 41.2%, reflecting pricing discipline and cost controls. This segment now accounts for 31.6% of total revenue, up from 29% two years ago, signaling a strategic shift toward higher-margin food and beverage sales.

2. Fuel Demand Stability
Despite macroeconomic headwinds, fuel gallons sold rose 0.9% year-over-year, while fuel gross profit increased 1.2% to $256.3 million. Casey's leverages its location strategy—concentrating stores in high-traffic rural and suburban areas—to maintain fuel margins even as competitors face urban price wars.

3. Store Expansion and Geographic Diversification
Casey's added 154 stores in fiscal 2024, including its first locations in Texas, and plans at least 80 new stores in 2025. This expansion into untapped markets like Texas (its 17th state) reduces regional concentration risk while capitalizing on the $490 billion U.S. convenience store industry's steady growth.

Operational Efficiency and Margin Management

Casey's has mastered the “cost-to-serve” model, using automation, fuel efficiency systems, and labor optimization to improve margins. Q4 operating expenses rose just 1.1% year-over-year, despite running 137 additional stores. The company's focus on same-store labor hour reductions—a 2.1% decline in Q4—demonstrates its ability to scale without sacrificing profitability.

Balance Sheet and Capital Allocation

With $327 million in cash and a conservative debt load, Casey's has ample flexibility to fund its growth plans. The company prioritizes shareholder returns, evidenced by its dividend hikes and a remaining $295 million under its buyback authorization. Management's focus on ROI-driven expansion—avoiding overbuilding in saturated markets—ensures capital is deployed where it maximizes returns.

Investment Thesis: Why CASY is a Top Pick

1. Scalable Model: Expansion into low-penetration markets like Texas and the Midwest creates a clear path for mid-single-digit annual store growth, driving revenue and margin accretion.
2. Resilient Demand: The convenience store sector is recession-resistant, with fuel and grocery demand holding steady even in slowing economies.
3. Share Price Momentum: CASY's stock has surged 34% YTD (June 2025), outperforming the S&P 500 by a wide margin. Technical traders may see further upside as the stock approaches its 2023 high of $145.
4. Beat-and-Raise Discipline: CASY has consistently raised guidance while beating estimates, a pattern that builds investor confidence and reduces downside risk.

Backtest the performance of Casey's General Stores (CASY) when it reports an EPS beat exceeding consensus by at least 10%, buying on the earnings release date and holding for 20 trading days, from 2020 to 2025.

However, historical backtesting of this strategy from 2020 to 2025 shows that buying CASY on such beats and holding for 20 days underperformed the benchmark, yielding just 21.91% versus the benchmark's 108.26% return. This highlights the importance of considering broader market conditions alongside the company's fundamentals, as the strategy delivered poor risk-adjusted returns (Sharpe ratio of 0.26) and faced a maximum drawdown of -20.66%.

Risks and Considerations

• Fuel Price Volatility: A sharp drop in fuel demand or margins could pressure near-term profits.
• Labor Costs: Rising wages in the retail sector may compress margins if Casey's cannot offset increases via productivity gains.
• Regulatory Risks: Higher minimum wage laws or environmental regulations could add costs.
• Historical Strategy Underperformance: The backtest results underscore significant volatility and underperformance relative to broader markets following such earnings beats, warranting caution in timing entries.

Conclusion: Add Exposure Before Q1 2026

Casey's General Stores is a sector leader with a proven track record of execution, scalability, and shareholder value creation. With a robust balance sheet, disciplined capital allocation, and a growing footprint in high-potential markets, CASY is well-positioned to sustain its outperformance.

Investment Recommendation:
- Buy CASY at current levels ($128.50 as of June 6, 2025) for a 12- to 18-month horizon, but acknowledge the historical volatility highlighted by the backtest.
- Target Price: $150–$160 by Q1 2026, assuming 10% EPS growth and a modest multiple expansion.
- Risk Management: Set a stop-loss at $115 to protect against a material earnings miss or macro shock, considering the strategy's maximum drawdown of -20.66% in past events.

The convenience retail sector is a hidden gem in the current market, and Casey's is its brightest star. For investors seeking steady growth and dividend income, CASY deserves a place in core portfolios, provided they account for the historical performance nuances of earnings-driven strategies.