Casey's General Stores: A Resilient Growth Story Amid Market Challenges

Casey's General Stores (NASDAQ: CASY) has emerged as a standout performer in the convenience retail sector, delivering robust Q4 2024 earnings that underscore its resilience in a challenging market. With a 57% surge in diluted EPS to $2.34, 8.1% revenue growth, and ambitious store expansion plans, the company is positioning itself for sustained growth. This article examines how Casey's combines operational discipline, dividend stability, and strategic expansion to justify a “Buy” recommendation, while addressing risks tied to historical post-earnings volatility.

Key Metrics: A Strong Foundation for Growth

The Q4 results reflect Casey's ability to capitalize on fragmented market opportunities and execute its strategic initiatives:

1. EPS Beat and Margin Expansion:
2. EPS of $2.34 crushed estimates ($1.70) and grew 57% year-on-year, driven by improved inside store margins (41.2%, up 160 basis points).

3. Fuel performance also shone: gallons sold rose 0.9%, while margins hit 36.5 cents/gallon, contributing to a 15.4% jump in fuel gross profit.

4. Revenue and Store Growth:

5. Total revenue reached $3.60 billion, up 8.1% YoY, with inside sales growth of 5.6%.

6. The company added 154 stores in FY2024, entering Texas as its 17th state, and plans to expand by 100+ stores in 2025. This geographic diversification reduces regional risk and taps into underpenetrated markets.

7. EBITDA Outlook:

8. FY2025 EBITDA is projected to grow at least 8%, supported by margin discipline and same-store sales growth of 3–5%.

Dividend Policy: A Beacon of Stability

Casey's has maintained an unbroken 25-year dividend growth streak, with the latest hike of 16% to $0.50/share. This consistency is rare in volatile retail sectors, and the dividend yield of 1.1% (at current prices) is bolstered by a 27% trailing P/E ratio, reflecting strong earnings momentum.

Investors should note that the dividend payout ratio (22% of FY2024 EPS) leaves ample room for further increases, especially as EBITDA expands. The company's $1.1 billion liquidity ($206M cash + $900M credit lines) ensures it can fund dividends, share buybacks ($295M remaining), and growth without overleveraging.

Addressing Volatility: Risks and Opportunities

While Casey's has delivered compelling results, its stock has historically shown post-earnings volatility, with a 65% decline rate in the day after earnings. However, the median positive return of 7.4% when beating estimates (as seen in Q4 2024's 6.17% jump) suggests that earnings surprises can drive outsized gains.

Backtest the performance of Casey's General Stores (CASY) when 'buy condition' is triggered by earnings beats (EPS exceeding estimates), and 'hold for 20 trading days' after the announcement, from 2020 to 2025.

Historical backtesting reveals that the strategy of buying CASY shares on earnings beats and holding for 20 days since 2020 delivered an average return of 7.82% per trigger. However, this came with significant risk: a maximum drawdown of -21.29% and a Sharpe ratio of 0.12, indicating low risk-adjusted returns. While the strategy occasionally captured post-beat gains, its CAGR of 1.45% and -100.44% excess return underperformance relative to benchmarks highlight the challenges of timing volatility.

Analysts project FY2025 EPS of $15.31, implying 8.9% growth, which aligns with the company's guidance. The $462 average price target (3.7% upside from current levels) reflects confidence in its execution.

Valuation vs. Peers: A Compelling Case

Compared to peers like Alimentation Couche-Tard (ATD) and 7-Eleven (3382:TYO), Casey's stands out:
- ATD, while globally scaled, faces antitrust scrutiny and lower U.S. rural growth potential. Its valuation (P/E ~18) lags Casey's premium multiple, reflecting slower U.S. market penetration.
- 7-Eleven, the largest U.S. convenience chain, relies on centralized food prep and faces operational complexity. Its stock has underperformed due to margin pressures, unlike Casey's in-store efficiency.

Casey's ROE (2.58%) and low debt-to-equity (0.91) further distinguish it as a financially prudent player.

Conclusion: A “Buy” with Eyes on EBITDA and Expansion

Casey's combination of strong EPS growth, disciplined margin management, and aggressive store expansion in underserved markets positions it as a high-conviction “Buy”. Key catalysts include:
- EBITDA growth: The 8%+ target is achievable with same-store sales and fuel margin stability.
- Geographic diversification: Texas and other new markets offer scalability.
- Dividend resilience: The 25-year streak and ample liquidity ensure payouts remain secure.

While post-earnings volatility persists, the company's track record of beating estimates and executing on growth suggests that short-term dips present buying opportunities. For investors seeking a mix of income and growth, Casey's merits a buy-and-hold strategy, with a 12-month price target of $462—supported by its median post-beat returns. However, the backtest underscores that timing the volatility carries risks: the strategy's underperformance relative to benchmarks and elevated drawdowns warrant patience and a long-term focus.

Risk Note: Fuel margin contraction or slower store integration could pressure results. Monitor EBITDA trends and Texas market performance closely.

Data as of June 6, 2025.