The convenience retail industry is undergoing significant shifts, as detailed in fresh analysis conducted by Lisa K. Lewandowski, an analyst with BofA Securities. Her recent initiation of coverage on two notable players in this sector, Casey’s General Stores, Inc. and Murphy USA Inc., underscores contrasting operational strengths and headwinds facing these companies.
Casey’s General Stores: Strategic Emphasis on Foodservice Fuels Growth
Lewandowski commenced coverage of Casey’s General Stores with a Buy recommendation and set a price target of $700. This valuation is grounded in a 2027 enterprise value-to-EBITDA ratio of 15.9 times, which exceeds the company’s one-year average as well as the multiples seen among its convenience store peers.
The analyst attributes this premium valuation to Casey’s distinctive portfolio characterized by a high-margin foodservice segment coupled with consistent EBITDA expansion. She forecasts steady EBITDA growth in the medium term, predicting an annual growth rate within the 8% to 10% range.
In her assessment, Casey’s progressive success in the prepared foods market is a critical driver, enhanced by its regional outperformance in fuel sales metrics. Based on her estimations, approximately 61% of Casey’s fiscal 2025 revenue derived from fuel, yet internal transaction analysis reveals that nearly 70% of purchases made inside Casey’s stores exclude fuel products. This trend indicates that an increasing proportion of customers regard Casey’s locations as destinations for food rather than merely fueling stations.
Lewandowski also accentuated Casey’s position as the third-largest convenience store operator in the United States. She further highlighted the company’s notable presence in ancillary categories, citing its standing among the top pizza chains nationally and as one of the leading holders of liquor licenses across the country.
The rural market footprint of Casey’s is portrayed as a strategic advantage, particularly since it operates in underserved areas where food options may be limited. Lewandowski anticipates that foodservice margins will benefit from this setup, especially as the company initiates the conversion of CEFCO locations to Casey’s-branded stores starting in 2026.
Additionally, Lewandowski notes that Casey’s three-year strategic plan is approaching completion, suggesting the company is well-positioned to execute on its growth initiatives effectively.
Murphy USA: Challenges Arising from Fuel and Nicotine Reliance
In contrast, Murphy USA was assigned an Underperform rating along with a $405 price target by Lewandowski, who reinstated coverage on the company. Murphy USA’s valuation applies a lower 2027 EV-to-EBITDA multiple of 8.6 times, which sits beneath its historical long-term average and implies limited near-term appreciation potential.
The analyst pinpointed Murphy USA’s heavy dependence on fuel sales as well as nicotine products as significant constraints on its earnings leverage. Specifically, the current environment of relatively low gasoline prices combined with subdued volatility in fuel costs suppresses profitability expansion opportunities.
Furthermore, diminishing cigarette volumes negatively impact the retailer’s ancillary revenue streams, while its foodservice operation remains relatively small. These combined factors challenge Murphy USA’s ability to improve overall performance, particularly amid economic pressures affecting lower-income demographic groups.
However, Lewandowski acknowledged several positive aspects of Murphy USA’s business model. These include its lean operational structure and adherence to a value-oriented pricing approach. The company’s proximity to Walmart stores also offers competitive advantages, along with a disciplined strategy toward store expansion.
Commitment to delivering shareholder returns and an attractive valuation profile provide some level of long-term investor support, even as risks persist.
Risks and Market Considerations
The analyst outlined potential downside risks such as sharp increases in oil prices, broader economic stressors, and possible disruptions in the relationship between Murphy USA and Walmart. Conversely, upside scenarios could materialize if fuel prices rise, if fuel price volatility intensifies, or if consumer disposable income trends improve.
Market Performance Snapshot
Reflecting these divergent outlooks, shares of Casey’s General Stores were trading up by 2.84% at $603.01 as of the last check on Friday, whereas Murphy USA shares declined by 1.11% to $424.19.
With Casey’s focus on foodservice innovation, expansive rural presence, and diversified revenue streams, the company is positioned to navigate evolving consumer preferences in convenience retail effectively. Conversely, Murphy USA’s pronounced exposure to fuel market volatility and constrained foodservice operations present substantial challenges amid current economic conditions.