Casey's General Stores: A Recipe for Sustained Growth in a Competitive Landscape

Casey's General Stores (CASY) has emerged as a standout player in the convenience retail sector, delivering record financial results and setting ambitious targets for fiscal 2026. With a relentless focus on strategic execution, operational efficiency, and disciplined capital allocation, the company is positioning itself as a long-term growth story. Despite trading at premium valuation multiples, Casey's compelling fundamentals—driven by store expansion, margin resilience, and dividend discipline—make it a compelling buy for investors willing to bet on its execution.

Financial Resilience Amid Expansion

Casey's FY2025 results underscore its ability to grow profitably even as it scales. Net income rose 8.9% to $546.5 million, while EBITDA hit a record $1.2 billion, a 13.3% jump from FY2024. This growth was fueled by:
- Inside sales growth: Same-store sales increased 1.7% year-over-year, with two-year stacked growth of 7.4%, driven by strong performance in high-margin categories like bakery, cold beverages, and hot foods.
- Fuel margin expansion: Fuel gross profit surged 21.4% to $307.8 million, aided by higher RINs sales and a 37.6-cent-per-gallon margin—a 4% improvement from FY2024.
- Operational efficiency: Same-store labor hours declined for the 12th consecutive quarter, offsetting wage inflation and reducing costs.

The company's balance sheet remains robust, with a debt-to-EBITDA ratio of 1.9x and $1.2 billion in liquidity, ensuring flexibility for future growth initiatives.

Strategic Execution: Store Growth and Margin Management

Casey's success hinges on its three-year strategic plan, which prioritizes unit growth and margin preservation. In FY2025, it executed aggressively:
- Store expansion: Added 270 stores—its highest annual total ever—through construction and acquisitions, including the acquisition of 198 CEFCO convenience stores via the Fikes Wholesale deal. This expanded its footprint to 2,547 stores, solidifying its position as a top U.S. convenience retailer.
- Customer engagement: The Casey's Rewards program now boasts 9 million members, driving loyalty and incremental sales.
- Margin discipline: Inside gross margins held steady at 41.2%, while fuel margins improved despite macroeconomic headwinds.

The company also returned capital to shareholders, hiking its dividend by 14% to $0.57 per share—marking the 26th consecutive annual increase. With $295 million remaining under its buyback authorization, management remains committed to rewarding shareholders.

FY2026 Guidance: A Path to Continued Outperformance

Management projects FY2026 EBITDA growth of 10–12%, supported by:
- Inside sales growth of 2–5%, leveraging its high-margin foodservice offerings.
- 80+ new stores in 2026, part of a three-year target to add 500 stores through M&A and organic growth.
- Cost control: While operating expenses are expected to rise 8–10%, management emphasized that same-store labor efficiencies and store-level optimization will mitigate pressures.

The guidance assumes flat fuel gallons sold, reflecting cautious assumptions about macroeconomic conditions. However, the company's focus on margin resilience and scale advantages should insulate it from short-term volatility.

Valuation: A Premium Price for a Premium Growth Story

Casey's current valuation multiples—15.5x EV/EBITDA and 33.5x P/E—are significantly above the retail cyclical sector median (25.5x EV/EBITDA, 22.1x P/E). Critics may argue the stock is overvalued, but the premium is justified by its execution track record and growth catalysts:
- High-return stores: New locations, particularly in underserved markets, generate strong returns (30–40% in the first year).
- Dividend consistency: A 26-year dividend growth streak signals financial discipline.
- Margin stability: Despite rising costs, Casey's has maintained margins through process improvements and pricing power.

Risks and Considerations

• Competition: Intense rivalry from rivals like 7-Eleven and Wawa could pressure margins.
• Interest rates: Rising borrowing costs may strain the balance sheet, though the current 1.9x debt-to-EBITDA ratio offers a buffer.
• Consumer spending: A slowdown in discretionary spending could dent inside sales growth.

However, Casey's store density, brand loyalty, and cost-control culture mitigate these risks.

Investment Thesis: Buy with a Long-Term Lens

Casey's is not a cheap stock, but its execution of growth and margin strategies positions it as a rare “high-quality” convenience retailer. The 10–12% EBITDA growth target for FY2026, coupled with a 14% dividend hike, suggests the company can deliver 15–20% annual total returns over the next three years.

Catalysts to watch:
1. New store openings and their profitability.
2. Margin trends in high-margin food categories.
3. Buyback progress and dividend growth.

Investors should consider adding Casey's to their portfolios for its defensive cash flows, growth runway, and shareholder-friendly policies. While valuation multiples are rich, the company's track record of overdelivering on guidance justifies the premium.

Final Take

Casey's General Stores is more than a convenience retailer—it's a well-oiled machine of growth, efficiency, and shareholder value creation. Despite its high valuation, the stock remains a compelling buy for investors focused on long-term returns. With a disciplined management team and a playbook proven to scale, Casey's is poised to outperform in a sector where execution is everything.