Fastenal Company Down to Strong Sell - Analyst Blog

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On Jan 17, Zacks Investment Research downgraded Fastenal Company ( FAST ) to a Zacks Rank #5 (Strong Sell) following disappointing fourth-quarter and fiscal 2013 results.

Why the Downgrade?

Fastenal's adjusted earnings of 33 cents per share in the fourth quarter of 2013 missed the Zacks Consensus Estimate by a penny. Earnings were flat year over year, in contrast to the company's guidance of year-over-year growth, as sales and margin deteriorated beyond expectations.


Fastenal reported net sales of $813.8 million in the fourth quarter of 2013, up 7.5% year over year. Net sales also missed the Zacks Consensus Estimate of $816 million by a marginal 0.3%.

The national distributor of industrial/construction supplies has been struggling with its top line due to lower sales of its fasteners product line which is being hurt by end-market slowdown and broader economic uncertainty.

Management has been slowing down store growth in favor of increasing headcount to drive near-term sales growth. However, such initiatives increase employee costs and hurt margins.

In fourth-quarter 2013, gross margin declined 100 basis points (bps) from the prior-year quarter to 50.6%.Gross margin also declined 110 bps sequentially. Fourth quarter gross margin missed the company's long-term gross margin range of 51% to 53%. Gross margin fell short of company's expectation of margin expansion due to weakness in fastener products, a competitive marketplace, reduced supplier incentives and lower utilization of trucking networks.

Fastenal's earnings of $1.51 per share in fiscal 2013 increased 6.3% year over year but missed the Zacks Consensus Estimate of $1.54 by 1.9%. The company reported net sales of $3.326 billion in fiscal 2013, up 6.1% year over year. Net sales missed the Zacks Consensus Estimate of $3.327 billion.

Better-ranked stocks in the industrial goods sector include  PulteGroup, Inc. ( PHM ), The Home Depot, Inc. ( HD ) and Lumber Liquidators Holdings, Inc. ( LL ). All the three companies carry a Zacks Rank #2 (Buy)



FASTENAL (FAST): Free Stock Analysis Report

HOME DEPOT (HD): Free Stock Analysis Report

LUMBER LIQUIDAT (LL): Free Stock Analysis Report

PULTE GROUP ONC (PHM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: FAST , HD , LL , PHM

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