Why Is Fastenal (FAST) Down 6.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Fastenal (FAST). Shares have lost about 6.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fastenal due for a breakout? 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 catalysts.
Fastenal Q1 Earnings & Revenues Beat Estimates
Fastenal Company started 2022 on a solid note. The company’s earnings and revenues not only beat the Zacks Consensus Estimate but also 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
Fastenal reported earnings of 47 cents per share, which topped the consensus mark of 44 cents by 6.8% and grew 27.8% from the year-ago period.
Net sales totaled $1,704.1 million, beating the consensus mark of $1,682 million by 1.3% and increasing 20.3% from the year-ago figure of $1,417 million.
It reported daily sales of $26.6 million, reflecting an increase of 18.4% year over year for the quarter. The upside was mainly due to higher unit sales of most products to traditional manufacturing and construction customers, stemming from an improvement in business activity. On a monthly basis, daily sales improved 19.1%, 21.3% and 14.9% in March, February and January, respectively, year over year.
Daily sales of Fastener products (mainly used for industrial production and accounting for approximately 34.3% of first-quarter sales) rose 24.6% year over year, backed by higher manufacturing and construction demand as well as increased pricing. Sales of safety products (accounting for 21% of first-quarter sales) grew 15.3% 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 44.7% of fourth-quarter sales) grew 14.8% year over year.
Vending Trends & Other Growth Drivers
Fastenal signed 106 new Onsite locations during the quarter. As of Mar 31, 2022, the company had 1,440 active sites, up 12.1% 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.
FAST continues to expect 375-400 annual Onsite signings in 2022.
Daily sales through weighted FMI devices grew 46% for the first quarter and represented 35.4% of net sales.
Daily sales to national account customers (representing 57.1% of total quarterly revenues) increased 22.8% on a year-over-year basis for first-quarter 2022. Daily sales to non-national account customers (which include government customers and represent 42.9% of total quarterly revenues) rose 13% from the prior-year quarter.
Margins
Gross margin of 46.6% for the quarter improved 120 bps from the prior-year period. The improvement was driven by a higher product margin related to safety products and the absence of a write-down.
Also, operating margin improved 120 bps to 21% from the year-ago figure of 19.8%.
Financials
Cash and cash equivalents were $234.2 million as of Mar 31, 2021, slightly down from $236.2 million on Dec 31, 2021. Long-term debt at quarter-end was $330 million, same as 2021-end.
For the first three months of 2022, cash provided by operating activities totaled $230 million compared with $274.8 million in the comparable year-ago period.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Fastenal has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Fastenal has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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