Fastenal Company (FAST): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
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.

Overview:

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 sales.

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.


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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 , Stocks

Referenced Stocks: FAST , MRO

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As of 12/26/2014, 04:15 PM


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