In a report published Wednesday, Bank of America analyst Kelly A. Bania downgraded the rating on Casey's General Stores CASY from Buy to Neutral, but raised the price target from $60.00 to $63.00.
In the report, Bania noted, ”We are downgrading CASY to Neutral (from Buy) based primarily on valuation. Since our Aug 2011 upgrade, CASY's 2-yr forward PE has expanded from 11.5x to 17.3x currently (based on Cons figures). Given that Casey's stock usually peaks at 17-18x, we see little catalyst to drive the shares meaningfully higher than our revised $63 PO, particularly given a few risks to 2013, such as: 1) additional dollar store expansion into cigarettes/beer/wine which may already be a contributing factor to ongoing price competitiveness in the cigarette category; 2) tough comparisons in the prepared food & fountain category over the next several months; & 3) the potential for slowing major remodels given that returns are averaging +high-single digits% (compared to expectations for +double digits%).”
Casey's General Stores closed on Tuesday at $57.45.
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