) is set to report first-quarter fiscal 2014 results on Apr 11,
before the market opens.
Last quarter, Fastenal posted a negative earnings surprise of
2.94%. In fact, the company has missed the Zacks Consensus
Estimate for both revenues and earnings for two consecutive
quarters. Let's see how things are shaping up for this
Factors to Consider this Quarter
The company has been struggling with the top line for the past
few quarters due to lower sales of its fasteners product line
caused by end-market slowdown and broader economic uncertainty.
Moreover, the construction as well as vending businesses have
been soft for the past three quarters. Ironically, overall sales
have not improved despite regular growth programs.
According to the data released by the company, severe weather
conditions hurt sales further in the months of Jan and Feb 2014 -
the first two months of the first quarter. Accordingly, we do not
expect any significant top-line improvement in this quarter as
Management has been slowing down store growth in favor of
increasing headcount to drive near-term sales growth. However,
these initiatives increase employee costs substantially and hurt
margins. An unfavorable product mix (due to weakness in fastener
products which generate higher margins), pricing and competitive
pressures are also hurting gross margins. The accelerated hiring
pace is anticipated to continue in 2014 which could further
Management, however, expects gross margins to improve in the
first quarter of 2014 from a significantly weak fourth-quarter
2013 as headwinds relating to lower trucking utilization and
vendor incentives normalize.
Our proven model does not conclusively show that Fastenal is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here, as you will see below.
The Earnings ESP is 0.00%.
Fastenal carries a Zacks Rank #4 (Sell). We caution against
stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into
the earnings announcement, especially when the company is seeing
negative estimate revisions momentum. Estimates for Fastenal have
been declining for the last 60 days.
Other Stocks to Consider
Here are some other companies for investors to consider, that
according to our model have the right combination of elements to
post an earnings beat this quarter:
Builders FirstSource, Inc.
), with Earnings ESP of +100.0% and a Zacks Rank #3 (Hold).
), with Earnings ESP of +4.76% and a Zacks Rank #3.
Vulcan Materials Company
), with Earnings ESP of +17.65% and a Zacks Rank #1 (Strong
BUILDERS FIRSTS (BLDR): Free Stock Analysis
FASTENAL (FAST): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
VULCAN MATLS CO (VMC): Free Stock Analysis
To read this article on Zacks.com click here.