On Feb 21, we maintained a Neutral recommendation on
) following appraisal of its fourth-quarter 2012 results. The
company also carries a Zacks Rank #3 (Hold).
Why the Neutral Recommendation?
This industrial and construction supplies distributor's fourth
quarter 2012 earnings of 33 cents per share grew 10.0% year over
year, attributable to decent margin growth. However, though
revenue grew 8.5% year over year, it declined sequentially.
Fastenal's daily sales growth rates in the second, third and
fourth quarters of 2012 have been lower than that of the first
quarter as well as year-ago comparable periods mainly due to
weakness in its fastener product line. Its fasteners product line
is being hurt by end market slowdown and broader economic
uncertainty. From 15% growth in the first quarter of 2012, the
fastener product line, which accounted for 44% of sales in 2012,
dropped to 2.5% growth in the fourth quarter of 2012.
Estimates have mostly shown a downward trend after
announcement of the fourth quarter results. The Zacks Consensus
Estimate for 2013 has gone down by 1.2% to $1.66 while that for
2014 has gone down by 1.6% to $1.90 over the last 60 days.
Despite weak sales on the whole, the company is seeing some
progress around its vending program, FAST Solutions, and is fast
accelerating its vending contract signings and installations.
Industrial vending remains one of the primary growth drivers for
Fastenal. We are also encouraged by Fastenal's other growth
drivers like government business and metalworking, which are
gaining traction and could help achieve profitability in 2013 and
beyond. We thus remain on the sidelines on solid long-term
Other Stocks to Consider
Some building product maker stocks worth a look are
The Home Depot, Inc.
Lowe's Companies Inc.
Builders FirstSource, Inc.
). All of these companies are Zacks Rank #2 (Buy) stocks.
BUILDERS FIRSTS (BLDR): Free Stock Analysis
FASTENAL (FAST): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
LOWES COS (LOW): Free Stock Analysis Report
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