It has been about a month since the last earnings report for Fastenal (FAST). Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Fastenal due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Fastenal (FAST) Q2 Earnings Meet, Revenues Lag Estimates
Fastenal Company reported second-quarter 2022 results, wherein earnings came in line with the Zacks Consensus Estimate but revenues missed the mark. That said, the company’s top and bottom lines improved on a year-over-year basis, given strong demand for manufacturing and construction equipment and supplies, along with higher pricing.
Earnings & Sales in Detail
The company reported earnings of 50 cents per share, which came in line with the consensus mark but rose 19.7% from the year-ago period.
Net sales totaled $1,778.6 million, missing the consensus mark of $1,792 million but increasing 18% from the year-ago figure of $1,507.7 million.
The company reported daily sales of $27.8 million, reflecting an increase of 18% year over year, in the reported quarter. The upside was mainly due to higher unit sales across most products to traditional manufacturing and construction customers, stemming from improvement in business activity. On a monthly basis, daily sales improved 16%, 17.6% and 20.3% in June, May and April, respectively, year over year.
Daily sales of Fastener products (mainly used for industrial production and accounting for approximately 34.6% of second-quarter sales) rose 21.2% year over year, backed by higher manufacturing and construction demand as well as increased pricing. Sales of safety products (accounting for 20.3% of second-quarter sales) grew 13.8% on a daily basis. The upside was mainly driven by solid growth and higher pricing for traditional manufacturing and construction clients. Sales of the remaining products (accounting for 45.1% of second-quarter sales) grew 17% year over year.
Vending Trends & Other Growth Drivers
Fastenal signed 102 new Onsite locations during the quarter. As of Jun 30, 2022, the company had 1,501 active sites, up 13.5% from the year-ago period. Daily sales through Onsite locations (excluding sales transferred from branches to new Onsites) increased more than 20% from a year ago.
The company continues to expect 375-400 annual Onsite signings in 2022.
Daily sales, through weighted FMI devices, grew 36.8% for the second quarter and represented 35.6% of net sales.
Daily sales to national account customers (representing 57.3% of total quarterly revenues) increased 22.9% on a year-over-year basis for second-quarter 2022. Daily sales to non-national account customers (which include government customers and represent 42.7% of total quarterly revenues) rose 12.2% from the prior-year quarter.
Gross margin of 46.5% for the reported quarter remained unchanged from the prior-year period. A modest decline in product margin was offset by better leverage of organizational expenses, given solid business activity.
Operating margin improved 50 basis points (bps) to 21.6% from 21.1% a year ago.
Cash and cash equivalents were $247.9 million as of Jun 30, 2022, up from $236.2 million on Dec 31, 2021. Long-term debt at quarter-end was $310 million, down from $330 million at 2021-end.
During the reported quarter, FAST returned $227.8 million to its shareholders in the form of $178.5 million worth of dividends and $49.3 million worth of share repurchases.
For the first six months of 2022, cash provided by operating activities totaled $381.2 million compared with $446.3 million in the year-ago period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Fastenal has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Fastenal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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