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Fastenal sales rise, Signet to buy Diamonds Direct, American Airlines’ upbeat guidance

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Yahoo Finance's Julie Hyman and Brian Sozzi break down the morning's top stock movers, including Fastenal, Signet, and American Airlines.

Video Transcript

JULIE HYMAN: Let's talk about another company that reported earnings this morning, and that is Fastenal. We were paying close attention to this one for what it tells us about cost inputs. You can see it beat, on the top and bottom line-- that net sales increase, by the way, was about 10% there. And I will say-- and I know you, like me, are a bit of an earnings release nerd. You much more so than I, to be clear. Sorry, Soz.

But I got to respect the amount of detail that was in this earnings release for Fastenal.

BRIAN SOZZI: [CHUCKLES]

JULIE HYMAN: Seriously though. The company talking a lot about what was happening over the course of the period. They had strong growth and underlying demand for manufacturing and construction equipment in supply, so they had higher unit sales overall. But then, they say the growth was slightly limited by slower growth or contraction in sales of certain products. Now, in other words, they're saying they are still being affected by COVID in certain areas-- sales to government and warehousing customers.

Sales of safety products and janitorial supplies down as well, as maybe some places are closed or just changing dynamics around COVID. And of course, they talk about cost pressures related to material and transportation cost inflation. They talked about raising prices as well. So all of that balanced in those Fastenal numbers. There's the opening bell here this morning.

KORE is ringing the opening bell. It is a wireless company that's celebrating its listing. And our opening bell coverage is brought to you by PIMCO. Getting back to Fastenal though. So again, the company taking pricing actions throughout 2021, it said, to mitigate the impact of marketplace inflation. So again, all of that just from the release there, all of those different details.

BRIAN SOZZI: It's funny you mentioned the level of detail in this Fastenal report, because it essentially is like their annual report. They essentially write their annual report four times a year, every time they report earnings. But I always tell everyone that wants to get involved with investing, understand what's happening in the markets, actually, to read the earnings report from Fastenal. They are always the first company to report each earnings season.

The level of detail and insight they provide into the industrial economy, employee expenses, growth in the US and overseas is always first rate. So my hat tip to them. This is one of the most detailed earnings reports you will see on the street. And you mentioned expenses, Julie. You want to talk about inflation, as we have been, really, over the past few weeks. They are noting that employee-related expenses were up 16.8% in the third quarter this year compared to last year, calling out higher wages, higher bonuses for workers here.

So, at least-- you know, we focus so much on supply chain inflation and shipping costs, but of course, a major cost to any business is labor, in and of itself, and that could be a big headwind to many companies when they report this earnings season. I mean, looking through the prism of Fastenal, their costs for employees has shot way higher.

JULIE HYMAN: Yeah. A headwind, but also maybe an advantage for the companies that are paying up, if they're able to get better talent. I have a feeling that's the line that some of the banks are going to take when we hear from them later this week. Moving on to another mover this morning. Signet, the jewelry retailer that owns Kay Jewelers and Zales, is now going to own another-- Diamonds Direct. It's buying that company from Blackstone and other shareholders for $490 million.

Now, you've followed Signet pretty closely here, Brian. And, you know, this is another way for it to get sort of a higher-end engagement ring sort of business, right?

BRIAN SOZZI: Yeah. I'm looking for a clever way to play off their marketing at Kay Jewelers-- that every kiss begins with Kay. But I really don't have anything for you. It's been a long morning so far, Julie. The only thing I care about in this earnings release is twofold-- one, they raised their third quarter guidance and their full-year outlook. Immediately, that gets me thinking that the holiday season might be pretty good for some companies that have the right assortments. And number two, it's this quote from Signet. Their CFO, Joan Hilson, said, quote, "customers are showing positive response to our new product launches, and the reduction in government stimulus and customer shift to spending on entertainment and travel are having less impact than we previously anticipated." Very, very interesting there.

JULIE HYMAN: Here's something else that's really interesting. The CEO, Gina Drosos, telling Bloomberg in an interview that they ship a lot of their inventory via air, which right now, as we know, is a big advantage, with so many ships snarled and-- what did Andy Serwer call it in his weekend column? An oceanic parking lot. So Signet not subject to the oceanic parking lot, I guess.

BRIAN SOZZI: Yeah. It also helps too. And this won't obviously apply to a lot of companies-- jewelers have long lead times. So styles don't necessarily change from season to season, so it appears that Signet bought a lot of inventory in advance of this absolute shipping horror that we've seen across the country, and they're benefiting because of it.

JULIE HYMAN: Yeah. Diamonds don't go bad.

BRIAN SOZZI: Nope.

JULIE HYMAN: Let's also-- one final mover for you-- is to talk about what is happening with American Airlines here this morning. That company coming out with sort of a preliminary report ahead of their actual earnings report. And they're forecasting a smaller than expected adjusted net loss for their third quarter. That is $620 million to $675 million. That's still below-- or I should say-- it is better than what analysts have predicted, loss-wise. And third quarter revenue will fall about 25% compared with 2019, which is better than their sort of worst-case scenarios.

So, you know, this is sort of in line with what we've been hearing from the airlines, that things are bad but perhaps not as bad as the worst-case scenarios out there. We also, of course-- as we were talking about with our Anjalee Khemlani yesterday-- we've been seeing some of the Delta variant signs start to abate to some extent. But really, the crunch time and what's going to really tell us what's going on will be maybe later this month, later in the fall, to see if cases start to tick back up.

One check as well, Brian-- we should check back in on Southwest Airlines, which, last I saw this morning, was still having some cancellations, although you can see the shares right now are little changed. But I would imagine that is still one to watch.

BRIAN SOZZI: Yeah. Not a good look weekend, or really a week, for Southwest. We are seeing some breaking news, though, that they are supposed to return to service on Wednesday. But of course, a situation worth monitoring.