) reported adjusted earnings of 37 cents per share in the first
quarter of 2013, up 8.8% year over year on the back of top-line
growth. The company's earnings were in line with the Zacks
Fastenal reported net sales of $806.3 million, up 4.9% year over
year, driven by increase in unit sales and favorable impact from
FAST solution initiative, which offset the decline in fastener
sales. However, net sales lagged the Zacks Consensus Estimate of
Fastenal serves customers in the manufacturing and
non-residential construction markets. Sales were slow in both the
Fastenal's daily sales growth rates came in at 6.7%, 8.2% and
5.1% for the months of January, February and March, respectively,
significantly down from the daily growth rates of 21.3%, 20.0%
and 19.3% in the corresponding prior-year months. The sequential
change in daily sales for 12 months from January to December also
fell short of historical averages. Foreign exchange dragged first
quarter daily sales growth rates by 0.1%.
Daily sales to manufacturing customers (representing almost 50%
of revenues) grew 7.0% in the first quarter, much below 20.3% in
the prior-year quarter and 9.7% in the preceding quarter. Daily
sales growth rates to manufacturing customers have declined
sharply due to lower sales of its fasteners product line, which
are being hurt by end market slowdown and broader economic
The company supplies two types of products to manufacturing
customers, one for industrial production and the other for
maintenance of the manufacturing business.
Sales of products for industrial production dipped significantly,
owing to a continuous downfall in daily sales growth rates of
fastener products (used mainly for industrial production) to 1.7%
in the quarter. This was also lower than 2.6% growth recorded in
the previous quarter.
Sales of non-fastener products (used mainly for maintenance)
was 10.8% in the first quarter of 2013, down from 13.6% in the
preceding quarter; the decline being less dramatic than fasteners
due to strength in the FAST Solutions, which was partially offset
by weak industrial environment.
FASTENAL (FAST): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
LUMBER LIQUIDAT (LL): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
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In the non-residential construction market, daily sales to
non-residential construction customers (representing 20% to 25%
of revenues) grew 2.9% in first quarter of 2013, down from 17.1%
in the first quarter of 2012 and 4.2% recorded in the fourth
quarter of 2012. Management blamed the weakness in the overall
non-residential construction market and the uncertainty in U.S
economic policy for the decline in this business.
Vending Machine Activity is Gaining Traction
The company has adopted FAST Solutions, an industrial vending
process that has the potential to revolutionize the industrial
distribution system and increase profitability. The company
installs vending machines that aid in controlling inventory and
administrative costs while reducing product consumption. Despite
overall weak sales, the company is seeing some progress around
its vending program.
In the first quarter, the company installed 4,352 new machines,
up 20.6% sequentially. As of Mar 31, 2013, the company operated
25,447 FAST Solutions vending machines. The vending machines now
account for over 25% of the company's sales. During the quarter,
the company signed 5,728 vending machine contracts, up 2.5%
In 2013, the company aims to sign 2,500 machines per month or
30,000 per year.
In first quarter 2013, gross margin improved 70 basis points from
the prior-year quarter to 52.6% attributable to improved
transactional margins. The company believes that its normal gross
margin range is 51% to 53%.
The company recorded operating and administrative expense of
$247.3 million, up 6.1% year over year mainly due to higher
incentives to employees.
Fastenal had 2,660 stores at the end of first quarter of 2013, up
from 2,652 stores in the sequentially preceding quarter. During
the first quarter of 2013, the company opened 11 new stores, up
Fastenal carries a Zacks Rank #3 (Hold).
With the overall housing market improving steadily, other
companies in the sector are also performing well. These include
Ryland Group Inc.
Lumber Liquidators Holdings, Inc.
). While Ryland and Lumber carry a Zacks Rank #1 (Strong Buy), KB
Home carries a Zacks Rank #2 (Buy).