Fastenal's earnings of $0.45 per share in the third quarter of 2014
were in line with the Zacks Consensus Estimate. Earnings grew 12.5%
year over year as strong top-line performance was offset by weak
margins. Sales beat the consensus mark and grew 14.3% year over
year. After struggling for several quarters, Fastenal's top line
turned around in 2014 as underlying markets improved, vending
re-vamped, sales improvement efforts showed results and comparisons
eased. However, Fastenal's margins are contracting as management's
focus shifts away to top-line improvement. An unfavorable product
mix, pricing and competitive pressures are hurting gross margins.
In fact, management lowered its long-term gross margin expectation
following the third-quarter results. We, therefore, remain on the
sidelines due to gross margin concerns.
Based in Winona, MN, Fastenal Company (FAST) is a national
wholesale distributor of industrial and construction supplies. The
company distributes its products through approximately 2,700
company-owned stores mostly located in North America.
Around 11% of its net sales are generated from stores located
outside the United States, mainly in Canada. Other company stores
are located mainly in Central and South America and Europe.
Fastenal derives sales from the fastener product line and the
other product line. The fastener product line comprises two kinds
of products, threaded fasteners, and miscellaneous industrial and
construction supplies and hardware. Threaded fasteners include
products like bolts, nuts, screws, studs and related washers while
miscellaneous industrial and construction supplies and hardware
include various pins and machinery keys, concrete anchors, metal
framing systems, wire rope, strut, rivets and related accessories.
Threaded fasteners are used in most manufactured products and
building projects, and for the maintenance and repair of machines
and structures. Threaded fasteners accounted for 38% of the
company's sales in 2013.
The other product line includes tools, cutting tools, material
handling, janitorial, electrical and welding supplies and many
more. The non-fastener products now represent close to 60% of its
Fastenal mainly serves customers in the manufacturing and
non-residential construction markets. In the manufacturing market,
its customers include original equipment manufacturers (OEMs) and
maintenance and repair operations (MRO) while in the
non-residential construction market it serves general, electrical,
plumbing, sheet metal and road contractors.
Fastenal Company (FAST): Read the Full Research
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