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Fastenal Company (NASDAQ: FAST), a leading distributor of industrial and construction supplies, has continuously innovated its product portfolio using new technologies over the years, and has maintained its market dominance. Reflecting growth initiatives and an aggressive e-commerce push, last year the company’s e-commerce revenue crossed $1 billion for the first time.
Shares of the Winona, Minnesota-based company remained largely unaffected by the recent market downturn and outperformed the market quite often. Over the past few weeks, the stock has remained above its long-term average and the price appears high in relation to the short-term earnings trend. So, this is not a good time to buy stocks, but potential investors can monitor and wait for the right opportunity. The company recently raised its dividend to $0.35 per share, a move that should encourage long-term investors.
Pros vs Cons
Currently, Fastenal has the qualities of a growing business, but economic uncertainty and ongoing supply chain issues call for caution in investing. The company, which supplies manufacturing and construction companies with a variety of products including fasteners, tools, and safety supplies, has increased its market share in recent years through strategic relationships and M&A deals. Last year, profits improved helped by good price action from management, although that momentum waned in the fourth quarter when price levels in the market remained stable.
Q1 Budget
Fastternal’s adjusted earnings are expected to rise to $0.50 per share in the first quarter of 2023 from $0.47 per share a year ago. The following is estimated to benefit from a 9% growth in revenues to $1.85 billion. The results will be released on April 13, before the opening bell.
From Fastenal’s Q4 2022 earnings conference call:
“Three months ago and for the next six months, I’m going to push our leadership very hard on what we’re doing until we increase our headcount and think about it. I think it’s good – putting the economy aside for a moment, I think we’re happy that we have 350-plus new Onsites that will be juiced as we enter 2023, and we don’t have the numbers. to 2022 or 2021. And there are some positives there. But in terms of the underlying economy, we’re not sure if the PMI is right or wrong, but we’re playing, assuming correct.
Key Number
Fastenal’s quarterly earnings have topped or matched analyst estimates for the past three years. The trend continued in the last three months of fiscal 2022 when sales and net profit rose to $1.70 billion and $0.43 per share, respectively, and exceeded expectations. Meanwhile, reflecting the challenging market background, daily sales growth and on-site mark-ups fell for the third consecutive time.
FAST’s performance isn’t encouraging ahead of next week’s earnings, as it’s down about 5% this month. Shares traded flat in the early hours of Monday after closing the previous session lower.
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