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Wall Street’s Downgrades Have Lowered Casey’s Rating

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Jun. 1 2017, Updated 10:37 a.m. ET

Wall Street’s view of Casey’s

Casey’s General Stores (CASY) is rated by 13 Wall Street analysts, who jointly rate the stock a 2.2 on a scale of 1.0 for “strong buy” to 5.0 for “sell.” Its ratings have gotten worse over the last two to three months, from 1.8 in February to 2.1 in March and 2.2 currently, primarily due to a couple of downgrades.

Competitor Murphy USA (MUSA) is at a slightly better rating of 2.1. Supermarkets Kroger (KR) and Sprouts Farmers Market (SFM) have the same rating of 2.2, while Supervalu is rated at 2.6. Mass merchandisers Walmart (WMT) and Costco (COST) are rated 2.6 and 2.1, respectively.

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Recommendations

Seven of the 13 analysts covering Casey’s stock have rated it a “buy,” while six have rated it a “hold.” The company was downgraded by Northcoast and RBC Capital Markets from a “buy” to a “hold” in March 2017. At the end of April 2017, Goldman Sachs initiated coverage on Casey’s with a “neutral” rating.

Despite the downgrades, Casey’s still doesn’t have a “sell” recommendation. Convenience store peers CST Brands (CST) and Murphy USA also don’t have any “sell” ratings.

Target price

Casey’s stock is currently trading at $115.78, or ~18.0% below its 52-week high. The retailer’s stock could likely touch $125.17 over the next 12 months, which is 8.0% above its current stock price. Individual target prices for the company range between $108 and $150.

Murphy USA, which has already risen 11.0% this year, is expected to rise another 8.0% over the next 12 months.

Valuations

Casey’s has touched its 52-week high valuation and is currently trading at a one-year forward price-to-earnings ratio of 24.7x. That compares to its three-year average price-to-earnings ratio of 21.0x.

The company continues to be cheaper than CST Brands (CST), which is valued at 29.0x. Murphy USA (MUSA), however, trades at a discount and is valued at 16.6x.

Investors looking for exposure to Casey’s through ETFs can invest in the iShares S&P Mid-Cap 400 Value (IJJ). CASY makes up 0.60% of IJJ.

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