Casey’s General Stores and Murphy USA: Initiation of Research Coverage

Thursday, July 13, 2017

William Blair & Company initiated research coverage of Casey’s General Stores, Inc. (CASY $104.27), which operates convenience stores that offer self-service fuel and prepared foods in the Midwest, and Murphy USA Inc. (MUSA $71.90), which operates convenience stores near Walmart supercenters with the majority of its locations in the Southeast United States.

Analyst Ryan Domyancic estimated that Casey’s General Stores, Inc. will generate EPS of $4.21 in 2018 and $4.57 in 2019 and that Murphy USA Inc. will generate EPS of $3.70 in 2017 and $4.71 in 2018.

“Casey’s General Stores operates nearly 2,000 convenience stores across 15 Midwestern states, with 57% of stores located in communities of 5,000 people or less. As a result, Casey’s serves multiple consumer need states as a fuel station, quick-service restaurant, and small grocery store. In addition, Casey’s is more competitively insulated in smaller communities as we found its largest competitors operate many of their stores in communities with populations greater than 20,000,” Domyancic said.

“Casey’s focus on rural communities and its proprietary food offering create a differentiated convenience store business in a commoditized landscape. Further, we believe Casey’s has at least a 10-year runway for about 4% unit growth as it continues to expand in its current market area.  The company is led by an experienced management team with its CEO in his 37th year at the company and its CFO in his 28th year,” he continued.

“Murphy USA (Murphy) operates more than 1,400 fuel stations at or near Walmart supercenters. It leverages the strong traffic at these supercenters and appeals to Walmart’s value-oriented customer base by attempting to be the low-priced fuel and tobacco provider in a market area. Thus, Murphy can sell substantially more fuel volume than peers, about 3.2 million gallons annually per store versus the public peer average of 1.4 million gallons,” he said. “Murphy has undertaken several initiatives to improve its profitability, including implementing best practices across its stores, which has resulted in a material reduction of labor hours. The company also rebid its distribution agreement, which led to improved merchandise margins, and it is undertaking capital projects such as raze-and-rebuilds, store refreshes, and cooler additions.”

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William Blair or an affiliate is a market maker in the security of Casey’s General Stores, Inc. and Murphy USA Inc.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from Casey’s General Stores, Inc. and Murphy USA Inc. or an affiliate within the next three months.

Officers and employees of William Blair or its affiliates (other than research analysts) may have a financial interest in securities of Casey’s General Stores, Inc. and Murphy USA Inc.

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