Stocks opened higher Thursday and then drifted down during the session as investors looked forward to first-quarter earnings reports. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) were essentially flat for the day.
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As for individual stocks, Fastenal (NASDAQ: FAST) reported strong first-quarter results, and an optimistic outlook from Bed Bath & Beyond (NASDAQ: BBBY) got a cool reception from investors.
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Fastenal sees strong industrial demand
Shares of Fastenal rose 5% after the wholesaler of industrial parts reported first-quarter results that beat profit expectations and indicated that industrial activity remains strong. Net sales grew 10.4% to $1.31 billion, meeting expectations, and the company earned $0.68 per share, exceeding the analyst consensus by $0.01.
Daily sales increased 12.2%, and were up 12.7% in the month of March, rebounding from 10.5% growth in February, which was affected by bad weather. The company says it is seeing strong underlying market demand resulting in higher unit sales despite some price increases it made in 2018 to mitigate higher freight costs and tariff-related inflation.
Fastenal continues to succeed with its strategy of placing vending machines with its customers and locating dedicated sales and service people on or near customer premises. The number of installed vending machines rose 13.4% to 83,410 and onsite locations grew 39.4% to 945.
Investors lose more faith in Bed Bath & Beyond
Bed Bath & Beyond posted fiscal fourth-quarter results that beat profit estimates and gave guidance that exceeded expectations, but investor distrust of the management team only intensified following the report, and shares plunged 8.8%. Net sales in the holiday quarter fell 11% to $3.31 billion, missing analysts' expectations for $3.33 billion, and earnings per share excluding a non-cash impairment charge came in at $1.20, above the analyst consensus of $1.11. Comparable sales fell 1.4%.
The company raised its earnings guidance for fiscal 2019 from flat growth to a range of $2.11 to $2.20 per share, excluding one-time charges, or an increase of 3% to 7.3%. For 2020 and beyond, management said it expected gross margin improvement of 2 percentage points, operating margin expansion of 3 points, and double-digit growth rates in earnings per share.
That rosy outlook was immediately challenged by analysts on the conference call, who couldn't understand how Bed Bath & Beyond could expect gross margin to improve so much when it has been falling in recent quarters. CEO Steve Temares would not provide any details, nor would he comment on the effort by activist investors to replace him and the entire board, news of which had previously sent the stock soaring 22%. That silence did nothing to lend credibility to the company's turnaround plans.
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