Fastenal (NASDAQ:FAST) Reports Q3 In Line With Expectations

Industrial supplier Fastenal (NASDAQ:FAST) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 3.5% year on year to $1.91 billion. Its GAAP profit of $0.52 per share was 1% above analysts’ consensus estimates.

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Company Overview

Founded in 1967, Fastenal (NASDAQ:FAST) provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.

Maintenance and Repair Distributors

Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Maintenance and repair distributors that boast reliable selection and quickly deliver products to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is still a real threat, forcing investment in omnichannel capabilities to serve customers everywhere. Additionally, maintenance and repair distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.

Sales Growth

A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Fastenal’s sales grew at a mediocre 7.2% compounded annual growth rate over the last five years. This shows it couldn’t expand in any major way and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Fastenal’s recent history shows its demand slowed as its annualized revenue growth of 4.8% over the last two years is below its five-year trend. We also note many other Maintenance and Repair Distributors businesses have faced declining sales because of cyclical headwinds. While Fastenal grew slower than we’d like, it did perform better than its peers.

We can dig further into the company’s revenue dynamics by analyzing its sales volumes, which reached 123,193 in the latest quarter. Over the last two years, Fastenal’s sales volumes averaged 10.8% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, Fastenal grew its revenue by 3.5% year on year, and its $1.91 billion of revenue was in line with Wall Street’s estimates. Looking ahead, sell-side analysts expect sales to grow 5.9% over the next 12 months, an acceleration versus the last two years.

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Operating Margin

Fastenal has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 20.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Fastenal’s annual operating margin might have seen some fluctuations but has generally stayed the same over the last five years, highlighting the long-term consistency of its business.

In Q3, Fastenal generated an operating profit margin of 20.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth was profitable.

Fastenal’s decent 8.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Fastenal, its two-year annual EPS growth of 4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Fastenal reported EPS at $0.52, in line with the same quarter last year. This print beat analysts’ estimates by 1%. Over the next 12 months, Wall Street expects Fastenal’s full-year EPS of $2.01 to grow by 5.5%.

Key Takeaways from Fastenal’s Q3 Results

Revenue and EPS both beat by a small amount, showing the company is on track. Zooming out, we think this was a solid quarter. The stock traded up 3.5% to $72.45 immediately following the results.

So should you invest in Fastenal right now?If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings.We cover that in our actionable full research report which you can read here, it’s free.