Casey’s Analyst Day Highlights Further Growth Potential

ANKENY, Iowa -- Casey's General Stores Inc. has room for major growth in the future thanks to store remodels, pizza delivery and conversions to 24-hour locations, according to a report by Bonnie Herzog, senior analyst at Wells Fargo Securities LLC, based upon her attendance at the company's analyst day Wednesday.

In fact, she said these three initiatives led same-store sales comparables to rise more than 30 percent in prepared foods and 10 percent in groceries in just the first year since being implemented.

"After attending Casey's Analyst Day at its headquarters in Ankeny, Iowa, we came away incrementally more impressed by [its] efficient operations and robust potential for future growth," Herzog stated.

Wells Fargo's senior analyst also noted that Casey's second distribution center -- set to open in Terra Haute, Ind., in 2016 -- will result in greater efficiency and lower costs for the convenience store operator. Once the new distribution center opens, Herzog expects miles driven to be reduced by 40 percent, resulting in lower gallons consumed and lower driver costs.

Also impressive are Casey's growing gas and cigarette volumes, Herzog noted. "Casey's cig business is performing very well in our view," she wrote. "…Also, Casey's gallon growth has been impressive, aided by [its] partnership with Hy-Vee [Inc.]."

During the Analyst Day, Casey's management reiterated prior statements that it will not convert into a master limited partnership (MLP). "Despite the benefits realized by other operators in a MLP structure, management indicated no indication of converting to a MLP," said Herzog. "This is largely driven by Casey's lack of wholesale fuel distribution and its already low cost of capital."

Casey's General Stores Inc. operates 1,750 convenience stores in 14 states.