On Tuesday, JPMorgan made a slight adjustment to the price target for Casey's General Stores (NASDAQ:CASY), increasing it to $338.00 from the previous $337.00. Despite the price target hike, the firm maintained its Underweight rating on the stock. The adjustment comes ahead of the company's second-quarter fiscal year 2025 earnings, where the analyst has set an earnings per share (EPS) estimate at $4.10, which is below the consensus estimate of $4.30. Similarly, the earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast by JPMorgan stands at $311 million, also below the Street's expectation of $325 million.
In the earnings preview, the analyst highlighted several key metrics, including a modeled fuel margin of 40.0 cents per gallon, aligning with the company's early November press release. This represents a slight decrease from the first quarter's 40.7 cents. Additionally, the report anticipates a year-over-year increase of 0.2% in same-store gallons. The analysis also projects a 3.3% growth in same-store inside sales.
The grocery segment of Casey's General Stores is expected to see a 2.4% rise in same-store sales (SSS) with a unit gross margin of 35.0%, which is a slight decrease compared to the first quarter of fiscal 2025 but an increase from the second quarter of fiscal 2024. In the Prepared Foods division, the SSS is expected to grow by 5.4%, with a unit margin of 58.5%, which is a dip year-over-year due to rising cheese costs.
Operational expenses are predicted to be approximately $626 million, marking an increase of roughly 8.0% year-over-year, which includes some expenses related to the Fikes acquisition that closed in the third quarter, as previously discussed in the first-quarter earnings call. JPMorgan also forecasts cash flows from operations (CFO) at $298 million and capital expenditures (capex) at $141 million, resulting in free cash flow (FCF) of $157 million. The analyst expects no share buybacks for the quarter, attributing this to the financial impact of the Fikes acquisition.
In other recent news, Casey's General Stores has seen significant developments, including financial performance and strategic growth initiatives. The company reported a 7% increase in diluted earnings per share to $4.83, a 6% rise in net income to $180 million, and a 9% improvement in EBITDA, reaching $346 million for the first quarter of fiscal year 2025. Casey's also reported an expected fuel margin of approximately 40 cents per gallon for the second quarter.
Casey's General Stores finalized its acquisition of Fikes Wholesale, the proprietor of CEFCO Convenience Stores, marking the largest acquisition in the company's history. This expansion resulted in an addition of 198 stores to Casey's operations, bringing the total to around 2,900.
Regarding analyst reviews, Deutsche Bank (ETR:DBKGn) maintained a Buy rating on Casey's shares and raised the price target slightly from $451.00 to $454.00. JPMorgan, on the other hand, downgraded Casey's stock from Neutral to Underweight due to potential pressure on Prepared Foods margins from rising cheese costs. Evercore ISI raised Casey's share target from $435 to $440, maintaining an Outperform rating on the stock.
InvestingPro Insights
To complement JPMorgan's analysis of Casey's General Stores (NASDAQ:CASY), recent data from InvestingPro offers additional perspective on the company's financial position and market performance. Despite JPMorgan's Underweight rating, CASY's stock has shown strong momentum, trading near its 52-week high with a remarkable year-to-date price total return of 48.07% as of the latest data.
InvestingPro Tips highlight that Casey's has raised its dividend for 25 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's moderate level of debt, as noted by another InvestingPro Tip. These factors may provide some reassurance to investors in light of JPMorgan's cautious stance.
However, it's important to note that CASY is trading at a high P/E ratio of 29.61 relative to its near-term earnings growth, which aligns with JPMorgan's conservative outlook. The PEG ratio of 2.59 further suggests that the stock may be overvalued compared to its growth prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide valuable insights into Casey's General Stores' financial health and market position.
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