CASY - Casey's General Stores stock slips as JP Morgan reiterates Sell rating

Casey’s General Stores ( NASDAQ: CASY ) did not participate in a broader market rally on Tuesday, sliding just over 2% at its intraday low.

The slide comes after JP Morgan reiterated a Sell rating on the stock and advised caution on the adverse industry dynamics impacting the company. As the bank’s analysts consider the stock expensive at present, the downside is expected to be more pronounced than some of its peers.

“Opex and COGS pressures (e.g. labor, food ingredients, credit card fees) impacting the industry and the broader economy have eaten into profitability, with CASY more exposed on a per store basis than some competitors,” a note trimming estimates stated. “As the stock has tended to react negatively to opex increases, we think the risk is skewed towards potential further upward cost revisions in the current economic climate. With shares trading above our price target and the most expensively valued of our group, we remain Underweight.”

The analysts reduced sales estimates for the full year 2023 by about $200M and cut EPS estimates by one cent. The analysis also noted that the company must continue to integrate its acquisition of Circle K, Pilot, and Buchanan stores, adding uncertainty. As such, the price target for the stock was reduced to $173 from a prior $179.

Meanwhile, a “Buy” rating was maintained on Alimentation Couche-Tard ( ATD:CA ) due to strong management and discipline in terms of capital expenditure as compared to US peers. Parkland Corp. ( PKI:CA ) was likewise maintained at a Buy-equivalent rating due to a preference for Canadian operators, though its price target was trimmed to $39 from a prior $55. Finally, Murphy USA ( MUSA ) and Sunoco LP ( SUN ) were rated “Neutral”, with price targets increased and decreased, respectively.

“While MUSA is a player that has traditionally focused on low margin/ high-volume fuel and tobacco, the company’s focus on a larger store format through its raze/rebuild and new-build program has resulted in an improving mix of higher-margin non-tobacco merchandise,” JP Morgan’s analysts wrote, explaining their price target hike. “Further, the company’s new focus on adding a food & beverage capability (e.g., QuickChek acquisition) should introduce a higher-margin leg of growth to counter the legacy business’s lower-margin profile.”

Murphy USA ( MUSA ) was assigned a $246 price target, up significantly from a prior $195 target with notably higher EPS and margin expectations for the full year 2022.

Read more on Casey’s recent earnings results .

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