Casey’s General Stores is eyeing a stock split in 2025 – Magic Post

Casey’s General Stores Nasdaq: Casey It’s on track for a stock split that could happen in 2025 because its stock price, which has risen more than 525% over the past decade, is trending higher, putting it out of reach of “average” investors. What does that mean? High-quality companies like Casey’s General Stores tend to have their stock price trade at a level where ordinary investors, including their employees, can regularly buy shares. When the price gets too high, it’s time to split.

Casey’s General Stores Today

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Casey’s General Stores

$425.27 -0.43 (-0.10%)

(As of 12/13/2024 at 05:27 PM ET)

52 week range

$266.58

▼

$439.68

Dividend yield

0.47%

P/E ratio

29.64

Price target

$419.45

Assuming that ordinary investors can’t afford to spend thousands per month to buy just two or three shares, Casey’s General Stores’ stock price enters stock split territory. It is trading above $425 and trending higher, driven by self-funded growth, strong margins and returns of capital.

Similar dividend growth companies like Cintas Nasdaq: CTS They set a precedent by splitting their stock on a 4:1 basis earlier in 2024. Although it’s been many years, Casey’s has split in the past, so the precedents are strong, but it doesn’t really matter. Casey’s is a high-quality installation company that grows its business, distributes capital and delivers shareholder value; This stock will trend higher with or without a stock split.

Casey’s Q2 results reveal sustained strengths driving stock prices

Casey’s reported a mixed second quarter compared to consensus numbers reported by MarketBeat but it’s no less good because of it. The company’s revenues shrank due to lower gallons of fuel sold and prices achieved, but the loss is minimal and offset by strengths in other areas. Important details include 4% on-premises, 7.1% in the two-year package, and a wider margin.

Internal sales were driven by food and beverages, including hot sandwiches and cold drinks. Internal margin expanded by 110 basis points and helped drive leveraged growth in the bottom line despite the contraction in net revenues. Fuel sales, the largest segment and more than 60% of the business, contracted 0.6% and produced a narrower but still strong margin at more than $0.40 per gallon and not enough to offset strength in internal sales.

Margin and cash flow are among Casey’s strengths. The retailer’s EBITDA margin is approximately 10% and maintains healthy cash flow, balance sheet and return on capital. The net result in Q2 is GAAP earnings of $4.85, up 14% from the higher downturn, supported by internal efficiencies and share repurchases. The company did not repurchase any shares in the second quarter due to the Fikes acquisition, but activity since the end of Q2 2024 has increasingly reduced the number of shares during the quarter. Buybacks will likely resume soon because there is still $295 million active authorization, and the Fikes deal has closed. It is expected to be accretive by FQ4.

Casey’s positive cash flow supports growth and return of capital

Casey’s balance sheet shows some changes, but they’re all good. The company generated a strong positive cash flow quarter by pausing buybacks, positioning itself for strength now that the Fikes deal has closed. Highlights include increased cash, receivables and long-term assets, only partially offset by increased liabilities. Equity is up 10%, and leverage is very low despite the increase in debt, which is about 0.75 times equity. This leaves the company in a flexible position to continue investing in its growth and perhaps resume stock buybacks as soon as the current quarter.

Analysts respond positively to the news. MarketBeat tracks a set of post-release reviews that align with trends. Trends include increased coverage, firm sentiment, and higher target price. All post-release revisions increased target prices, keeping the market at an average of around $450 over the next 12 months. This is higher than consensus and is leading the market to new highs. A stock split is not guaranteed, but the price action is suggestive and may prompt Casey’s board to take action sometime next year.

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