Just because there is a pandemic and many are scared to get on an airplane, that doesn’t mean Americans don’t want to take a vacation and get away. Many who live in areas where the lock-down requirements have been more draconian are itching at the chance to get in the family vehicle and go somewhere.
With the summer winding down and the traditional end-of-summer Labor Day holiday just a short three weeks away, the last big push for travel on our nation’s highways is on, and companies that supply gasoline and many other items while traveling are the big winners. It is estimated that Americans are driving a minimum of 200 miles to their vacation destinations this year.
A new RBC research report notes that most operators are raking in “above average” profit levels at the pump. Then factor in all of the additional items travelers buy during trips and the numbers are very bullish.
We found four companies in the 24/7 Wall St. database that for varying reasons could be benefactors of this summer’s unusual travel patterns. All are rated Buy at major Wall Street firms, but it’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Casey’s General Stores
This hot consumer staples stock resides on the Jefferies Franchise Picks list. Casey’s General Stores Inc. (NASDAQ: CASY | CASY Price Prediction) and its subsidiaries operate convenience stores under the name Casey’s General Store in approximately 10 Midwestern states, including Iowa, Missouri and Illinois.
The company operates approximately 1,930 such stores, as well as two distribution centers through which it supplies grocery and general merchandise items to its stores. Its general store typically carries over 3,000 food and nonfood items. The stores sell regional brands of dairy and bakery products, and approximately 90% of the stores offer beer. Its nonfood items include tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive products.
Shareholders receive just a 0.72% dividend. The Jefferies price objective for the shares is $196, and the Wall Street consensus price target is $179.22. Casey’s General Stores stock closed Tuesday’s trading at $177 a share.
Kroger
This top grocer does almost all its business in the United States, and it is desperately trying to hire more workers to keep up with demand. Kroger Co. (NYSE: KR) is the second-largest U.S. food supermarket retailer and generates $120 billion in annual sales. Kroger operates roughly 2,800 supermarkets throughout 35 states and under two dozen banners. Kroger also sells fuel at 1,450 supermarket fuel centers and operates 2,268 pharmacies and 274 jewelry stores.
Analysts note that the company’s price leadership, strong management team, store execution and impressive leveraging of technology partnerships and investments (including a recently announced partnership with Ocado) should support Kroger’s revenue outlook and help drive efficiency.
Shareholders receive a 2.19% dividend. The BofA Securities analysts have a Buy rating and a $42 price target. The consensus target is $36.22, and Kroger stock closed at $36.24 on Tuesday.
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Murphy USA
This company has store locations in some of the top travel areas in the United States. Murphy USA Inc. (NYSE: MUSA) operates a chain of retail stores in the United States that offer motor fuel products and convenience merchandise. As of December 31, 2018, the company operated approximately 1,474 retail stores, including 1,160 Murphy USA and 312 are standalone Murphy Express stores located primarily in the Southwest, Southeast and Midwest United States.
Stephens has a Buy rating and recently raised the price target to $157. The consensus figure is $147, and Murphy USA stock closed at $142.63 per share.
Valero Energy
This Wall Street favorite is a very solid energy play for more conservative balanced accounts. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.
Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.
Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.
Investors receive an outstanding 7.16% dividend that appears to be safe. BofA Securities analysts are very bullish and have an $83 price target, while the consensus target is lower at $72.44. Valero Energy stock was last seen trading at $54.74.
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These four companies should see strong fuel and ancillary purchases from Americans choosing to travel by driving this summer. There is also the possibility this will continue into the fall as some could accomplish close business travel by driving. All four are good holdings for conservative investors looking for a degree of safety now.
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