Fastenal (FAST) Q3 Earnings Top, Sales Miss, Shares Rise

Fastenal Company’s FAST shares gained more than 4.6% in the pre-market trading session on Oct 12 after it reported third-quarter 2023 results. Earnings topped the Zacks Consensus Estimate but net sales missed the same. Both the top and bottom lines increased on a year-over-year basis, given daily sales growth, good expense control and lower net interest expense.

Earnings & Sales in Detail

The company reported earnings of 52 cents per share, which beat the consensus mark by a penny and increased 4.1% from the year-ago period.

Net sales totaled $1,845.9 million, missing the consensus mark of $1,849 million by 0.2% but increasing 2.4% from the year-ago level.

Daily sales of $29.3 million increased 4% year over year in the reported quarter. In the third quarter of 2023, Fastenal witnessed an upswing in unit sales, primarily attributed to robust growth at its Onsite locations, especially those established within the past two years. This robust performance effectively mitigated the effects of decreased demand from manufacturing customers and reduced revenues from construction and reseller customers. Additionally, foreign exchange fluctuations exerted a minor downward pressure on third-quarter sales, accounting for approximately a 10-basis point decrease.

On a monthly basis, daily sales improved 5%, 3.6% and 3.7% in September, August and July 2023, respectively, year over year.
 

Fastenal Company Price, Consensus and EPS Surprise

Fastenal Company Price, Consensus and EPS Surprise

Fastenal Company price-consensus-eps-surprise-chart | Fastenal Company Quote

Daily sales of Fastener products (mainly used for industrial production and accounting for approximately 32.1% of third-quarter sales) declined 2% year over year. Sales of safety products (21.4%) grew 9.2% on a daily basis. Sales of the remaining products (46.5%) grew 6.8% year over year.

On an end-market basis, daily sales of Heavy manufacturing (accounting for approximately 43.2% of third-quarter sales) rose 9% year over year. Sales of Other manufacturing (31.1%) grew 2.5% on a daily basis. Sales of Non-residential construction (9.1%) fell 7.2% on a daily basis. Sales of Reseller (5.8%) declined 6.9%, while that of Other (10.8%) increased 8.1% year over year.

Daily sales through weighted FMI devices grew 14.8% for the third quarter and represented 40.7% of net sales.

Daily sales to national account customers (representing 60.8% of total third-quarter net sales) increased 8.6% on a year-over-year basis. Daily sales to non-national account customers (which include government customers and represent 39.2% of total quarterly revenues) declined 1.9% from the prior-year quarter.

The company’s digital footprint increased to 57.1% of sales in the third quarter of 2023 from 49.5% of sales in the year-ago period.

Vending Trends & Other Growth Drivers

Fastenal signed 93 new Onsite locations during the quarter. As of Sep 30, 2023, the company had 1,778 active sites, up 13.5% from the year-ago period. Daily sales through Onsite locations (excluding sales transferred from branches to new Onsite) increased at a low double-digit rate year over year. This was backed by strong contributions from Onsite locations, activated and implemented over the last 12 months and continued growth from older Onsite locations.

For 2023, the company now expects 350 annual Onsite signings.

Margins

Gross margin was 45.9% in the reported quarter, flat year over year. This was due to customer and product mix, given increased growth in the lower margin of Onsite and non-fastener products, and lower product margins in certain other product categories. These were offset by a number of favorable variables like favorable freight costs.

Operating margin came in at 21%, unchanged from a year ago.

Financials

As of Sep 30, 2023, cash and cash equivalents were $297.5 million, up from $230.1 million on Dec 31, 2022. The long-term debt at third-quarter end was $200 million, down from $353.2 million at 2022-end. During the third quarter, FAST returned $199.8 million to its shareholders in the form of dividends.

During third-quarter 2023, cash provided by operating activities totaled $388.1 million, up 50.5% from the year-ago period.

Zacks Rank

Fastenal currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the Zacks Retail-Wholesale sector are:

Abercrombie & Fitch Co. ANF sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 724.8%, on average. Shares of ANF have surged 256.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ANF’s 2024 sales and earnings per share (EPS) implies increases of 10% and 1,644%, respectively, from the year-ago period’s levels.

Arcos Dorados Holdings Inc. ARCO currently carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 35%, on average. The stock has gained 19.6% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests a rise of 19.2% and 13%, respectively, from the year-ago period’s levels.

Amazon.com, Inc. AMZN sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 41%, on average. Shares of AMZN have gained 17.1% in the past year.

The Zacks Consensus Estimate for AMZN’s 2023 sales and EPS indicates a 11.1% and a 214.1% growth, respectively, from the year-ago period’s levels.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2023. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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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 Nasdaq, Inc.

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