Fresh Pizza And Gasoline
Bank of America's Daniel O'Hare initiated Casey's General Stores Inc CASY at Buy with a $150.00 price objective after applauding Casey's relatively unique products compared to Amazon: gas and fresh pizza.
A Convenience Store Success Story
"Casey's has operated highly successful convenience stores (c-stores) for over four decades," said the analyst. The company has grown to become the ninth largest convenience store (c-store) operator and the fifth largest seller of pizza in the United States, according to O'Hare.
Fresh-made pizza accounts for about 70 percent of the company's total annual sales. The large exposure to gasoline and fresh pizza keep Casey's relatively unaffected by the Amazon invasion.
Strong Fuel Growth
"We see support for above average fuel gross profit dollars," stated O'Hare. The analyst cited several drivers between his assumption:
- Improving backdrop for low and middle income consumers
- Outperformance of Casey's fuel gallon growth vs. total U.S. fuel supply
- Higher expected miles driven per consumer
- Successful fuel promotions including Pizza to Pump and Hy-Vee's Fuel Saver
- Higher renewable identification numbers (RINs) prices could lead to higher fuel margins from blending renewable fuel.
Additionally, since Casey's orders are only 7 percent online vs. Domino's Pizza, Inc. DPZ's 50 percent, there's significant room for a "mix-shift benefit to higher ticket online sales," according to O'Hare.
At time of writing, Casey's was seen trading slightly up by 0.54 percent on the day at $134.24.
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