Casey's General Stores: A Defensive Growth Play in an Uncertain Economy

As economic uncertainty looms, investors are increasingly seeking resilient companies capable of thriving despite headwinds. Casey's General Stores (NASDAQ: CASY) stands out as a prime example of a high Growth Style Score stock that combines defensive qualities with robust growth drivers. With 11.7% year-over-year cash flow growth, consistent earnings surprises averaging 22.4%, and a diversified regional footprint, CASY is positioned to outperform peers in a slowing economy. Contrast this with companies like Rush Enterprises (NASDAQ: RUSHA), which face regulatory and tariff-driven headwinds, and the case for CASY as a defensive growth play becomes clear.

Why Casey's is a Hedge Against Economic Downturns

1. Cash Flow Resilience: A Foundation for Growth

Casey's has demonstrated exceptional cash flow generation, a critical trait in volatile markets. In Q1 2025, the company reported $91 million in free cash flow, a stark improvement from a $27 million cash outflow in the same period last year. This resilience is underpinned by:
- Strong EBITDA growth: EBITDA rose 11.4% YoY to $242.4 million in Q1 and reached $1.2 billion for FY2025, driven by cost discipline and store expansions.
- Balanced liquidity: With $1.2 billion in available liquidity and a leverage ratio of 2.1x (targeting 2.0x by year-end), Casey's has the flexibility to invest in strategic initiatives like its $500 million property and equipment plan.

2. Consistent Earnings Surprises: Outperforming Expectations

Casey's has a track record of beating earnings estimates, a rare feat in an uncertain environment. For instance:
- Q1 2025 EPS: Delivered $2.33, 14.8% above the $2.03 consensus, driving a 5.3% stock price jump.
- Q4 2025 EPS: Rose 12.4% YoY to $2.63, exceeding estimates by 35%, with revenue up 7.8% to $3.9 billion.

This consistency stems from its rural market dominance (90% of stores in non-metro areas) and prepared food growth (e.g., 13.7% rise in hot sandwiches). The company's same-store sales strategy—balancing inside sales (grocery, beverages) and fuel—ensures steady revenue streams, even as competitors falter.

3. Diversified Regional Presence: A Shield Against Localized Risks

Casey's operates 2,904 stores across 17 states, with a focus on high-potential markets like Texas and the Midwest. This geographic diversification reduces reliance on any single region's economic performance. For example:
- Texas expansion: Plans to open 80+ new stores annually, leveraging strong demand in energy and agriculture sectors.
- Rural resilience: Rural consumers spend more on convenience goods during downturns, as they rely less on discretionary spending.

Contrast with Rush Enterprises: Regulatory Risks vs. Casey's Defensive Model

While Casey's thrives on operational discipline, Rush Enterprises exemplifies the risks of exposure to tariffs and regulations. Key contrasts:
- Tariff uncertainty: Rush faces potential cost hikes from U.S. tariffs on Canadian/Mexican truck parts, squeezing margins in its aftermarket division.
- Emissions compliance: The EPA's 2027 "Clean Diesel" rules could spur pre-buy demand volatility, whereas Casey's has no such industry-specific regulatory exposure.
- Profitability divergence: Rush's aftermarket revenue fell 4.6% in Q1 2025 due to fleet delays, while Casey's inside sales grew 15.9%.

Zacks Rank #3: A Hold, But Strategic Strengths Justify Buying

Casey's holds a Zacks Rank #3 (Hold), reflecting near-term valuation concerns. However, its long-term catalysts—such as 11% EBITDA growth guidance, a 26-year dividend growth streak, and $295 million remaining in buybacks—suggest it's undervalued at current levels. Analysts project a ~3.7% upside to the $462 consensus price target (vs. $445.69 on June 5).

Investment Thesis: A Growth-Defensive Hybrid

• Growth: CASY's expansion plans (500 stores over three years) and high inside sales margins (41%) support 10–12% EBITDA growth in 2026.
• Defensiveness: Its rural focus, fuel sales stability (37.6¢/gallon margin), and low debt make it less sensitive to economic slowdowns.

Risks to Consider

• Margin pressures: Integrating acquired stores like SEFCO could strain margins in 2026.
• Fuel price volatility: A sharp decline in fuel demand could impact profits.

Final Recommendation

Casey's General Stores is a compelling buy for investors seeking growth with downside protection. Its cash flow resilience, earnings consistency, and diversified regional model align perfectly with Citi's warning about economic uncertainty. Contrast this with companies like Rush Enterprises, which are vulnerable to external shocks, and CASY emerges as a safer, high-potential play.

Action Item: Consider adding CASY to a diversified portfolio, targeting entry points below $450. Monitor Q2 2026 results for execution on EBITDA growth and store openings.

In a world of regulatory and economic uncertainty, Casey's is proving that defensive growth isn't an oxymoron—it's a winning strategy.