Fastenal Company (NASDAQ: FAST) will be publishing fourth-quarter earnings next week. The industrial supplier has a good track record of delivering positive sales numbers that outperformed the broad market in recent years.
Shares of the company, which provides fasteners used mainly in the manufacturing and construction industries, performed well last year. Recently, the stock set a new record, ending a three-month winning streak. However, FAST has lost about 4% since the peak. The market will be keeping a tab on the earnings report to see where the stock is headed, given the uptick in manufacturing activity amid economic recovery.
Unique Profile
Fastenal keeps realigning the business with changing market conditions, which helps it stay resilient to external challenges to a large extent. Boosting supply chain capabilities, improving inventory management, and adopting new technology have been key priorities. It has a unique product profile, with fasteners constituting more than a third of total sales. The demand for OEM-oriented fasteners, which account for nearly 63% of total fastener sales, is highly cyclical due to the specific production needs of customers.
The management did some restructuring on the sales side of the organization, and the number of onsites – dedicated branches of the company set up within customers’ locations — outnumbered the number of regular branches last year, and the trend continues.
From Fastenal’s Q3 2023 earnings call:
“We continue to experience stagnant demand, a cyclical shift favoring non-fasteners, and a secular shift favoring larger manufacturing-oriented customers. Growth driver performance is not quite where we would like it to be, but it’s at levels that continue to support good growth in our installed base, success in providing differentiated value to our customers, and further cost and asset efficiency.”
The fourth-quarter report is slated for release on January 18, at 6:50 a.m. ET. It is widely expected that earnings increased to $0.45 per share from $0.43 per share in the prior year period. Wall Street is looking for revenues of $1.75 billion for Q4, up 3.3% from the fourth quarter of 2022.
Daily Sales Slowdown
Fastenal’s quarterly profit has not missed analysts’ estimates even once in the past four years. In the September quarter, net profit grew 4% year-over-year to $295.5 million or $0.52 per share. There was a 2% increase in net sales to $1.85 billion. Earnings beat the Steet view, while sales matched expectations. The muted top-line growth reflects a continued slowdown in daily sales growth. At the end of the quarter, the company had 1,778 active onsite locations, which is up 13% year-over-year.
Fastenal’s stock closed the last trading session slightly higher. The shares have dropped 2% so far this year.
