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Fastenal (FAST) Q1 Earnings & Sales Top Estimates, Stock Up

Zacks Equity Research

Fastenal Company FAST reported first-quarter 2019 results, wherein earnings and sales surpassed the respective Zacks Consensus Estimate, courtesy of higher market demand, and growth in industrial vending business and existing Onsite locations. Shares of the company climbed 2.5% following the earnings release.

Earnings & Sales Detail

Fastenal reported earnings of 68 cents per share in the quarter, beating the consensus mark by 1.5% and increasing 11.9% from 61 cents reported a year ago.
 
Net sales of $1.31 billion surpassed the consensus mark of $1.3 billion. Sales also grew 10.4% year over year on the back of higher underlying market demand, and growth in industrial vending business, existing Onsite locations and construction.
 
The company’s daily sales growth was recorded at 12.2%, lower than the 13.2% increase in the prior-year quarter, due to the one fewer selling day in the current period.

On a monthly basis, daily sales improved 12.7% in March, 10.5% in February and 13.3% in January compared with 13.1%, 14.8% and 12%, respectively, in the prior-year months.

Daily sales of Fastener products (mainly used for industrial production and accounting for approximately 34.8% of first-quarter sales) rose 11.8% year over year.
 
Non-fastener products’ daily sales (mainly used for maintenance and representing 65.2% of the quarterly sales) increased 12.7% year over year.

Fastenal Company Price, Consensus and EPS Surprise

Fastenal Company Price, Consensus and EPS Surprise | Fastenal Company Quote

Vending Trends and Other Growth Drivers

As of Mar 31, 2019, Fastenal operated 83,410 vending machines, up 13.4% year over year. During the quarter, the company signed 5,603 machine contracts, up 1.3% year over year.

Fastenal signed 105 new Onsite locations during the quarter, up from 100 signings in the prior-year period. As of Mar 31, 2019, the company had 945 active sites, up 39.4% from the comparable year-ago period. It signed 59 new national account contracts in the first quarter (representing 52.7% of the total revenues). Daily sales to national account customers increased 16.9% on a year-over-year basis during the quarter.

Higher Costs Hurting Gross Margin

Gross margin of 47.7% in the first quarter of 2019 contracted 100 basis points (bps) year over year due to changes in product and customer mix, inflation, and higher freight expenses.

However, operating margin expanded 20 bps year over year to 20% in the quarter, owing to an improvement in operating and administrative expenses.

Financials

Cash and cash equivalents were $185.4 million as of Mar 31, 2019, up from $167.2 million on Dec 31, 2018. Long-term debt at the end of the quarter was $484.6 million, down from $497 million at 2018-end.

Zacks Rank & Other Stocks to Consider

Fastenal currently has a Zacks Rank #2 (Buy). Other top-ranked stocks in the Zacks Retail-Wholesale sector include AutoZone, Inc. AZO, CarMax, Inc. KMX and Williams-Sonoma, Inc. WSM, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AutoZone’s earnings growth rate for the current year is projected at 22.6%.

CarMax has a three-five year expected EPS growth rate of 14.1%.

Williams-Sonoma surpassed earnings estimates in all the trailing four quarters, resulting in average positive surprise of 9.6%.

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