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Casey’s Common Shops (NASDAQ:CASY) didn’t take part in a broader market rally on Tuesday, sliding simply over 2% at its intraday low.
The slide comes after JP Morgan reiterated a Promote ranking on the inventory and suggested warning on the adversarial business dynamics impacting the corporate. Because the financial institution’s analysts think about the inventory costly at current, the draw back is anticipated to be extra pronounced than a few of its friends.
“Opex and COGS pressures (e.g. labor, meals components, bank card charges) impacting the business and the broader financial system have eaten into profitability, with CASY extra uncovered on a per retailer foundation than some rivals,” a be aware trimming estimates acknowledged. “Because the inventory has tended to react negatively to opex will increase, we expect the danger is skewed in the direction of potential additional upward price revisions within the present financial local weather. With shares buying and selling above our worth goal and probably the most expensively valued of our group, we stay Underweight.”
The analysts diminished gross sales estimates for the complete 12 months 2023 by about $200M and reduce EPS estimates by one cent. The evaluation additionally famous that the corporate should proceed to combine its acquisition of Circle Okay, Pilot, and Buchanan shops, including uncertainty. As such, the worth goal for the inventory was diminished to $173 from a previous $179.
In the meantime, a “Purchase” ranking was maintained on Alimentation Couche-Tard (ATD:CA) attributable to sturdy administration and self-discipline when it comes to capital expenditure as in comparison with US friends. Parkland Corp. (PKI:CA) was likewise maintained at a Purchase-equivalent ranking attributable to a desire for Canadian operators, although its worth goal was trimmed to $39 from a previous $55. Lastly, Murphy USA (MUSA) and Sunoco LP (SUN) had been rated “Impartial”, with worth targets elevated and decreased, respectively.
“Whereas MUSA is a participant that has historically centered on low margin/ high-volume gas and tobacco, the corporate’s give attention to a bigger retailer format via its raze/rebuild and new-build program has resulted in an bettering mixture of higher-margin non-tobacco merchandise,” JP Morgan’s analysts wrote, explaining their worth goal hike. “Additional, the corporate’s new give attention to including a meals & beverage functionality (e.g., QuickChek acquisition) ought to introduce a higher-margin leg of progress to counter the legacy enterprise’s lower-margin profile.”
Murphy USA (MUSA) was assigned a $246 worth goal, up considerably from a previous $195 goal with notably larger EPS and margin expectations for the complete 12 months 2022.
Learn extra on Casey’s latest earnings outcomes.
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