) recently announced that it is likely to miss fourth quarter
2013 average analyst earnings estimate of 36 cents, due to
sluggish sales, higher employee cost and weak margins. However,
earnings are expected to surpass the year-ago figure of 33 cents.
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. Daily sales growth was 5.7% in
September, 7.7% in October, and 8.2% in November, compared to a
respective 12.9%, 6.8% and 8.2% in the corresponding prior year
months. Weak sales were due to sluggishness in the heavy
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
fact, gross margin is also below company's expectation due to
weakness in fastener products, a competitive marketplace, reduced
supplier incentives and lower utilization of trucking networks.
In addition, the company's focus on increasing store headcount
and field leadership adversely impacted gross profit.
However, the company is positive about the upcoming quarters and
expects increased headcount in stores to generate solid sales. In
fact, the company is trading off short term earnings for better
Fastenal carries a Zacks Rank #4 (Sell). We would also like to
see substantial sales recovery before becoming more positive on
Better-ranked stocks in the building products/ building
construction sector include
Lumber Liquidators Holdings, Inc.
Builders FirstSource, Inc.
The Home Depot, Inc.
). While Lumber and Builders FirstSource carry a Zacks Rank #1
(Strong Buy), The Home Depot holds a Zacks Rank #2 (Buy).
BUILDERS FIRSTS (BLDR): Free Stock Analysis
FASTENAL (FAST): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
LUMBER LIQUIDAT (LL): Free Stock Analysis
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