Fastenal Company (NASDAQ: FAST), a leading supplier of industrial and construction supplies, is preparing to report its fourth-quarter results next week. While the company has a successful business model and a strong track record of execution, there has been a slowdown in growth recently.
Overall, Fastenal’s stock performed well in 2024, making steady gains in the latter half of the year and hitting an all-time high in early November. Though the shares lost some momentum since then, they are regaining strength ahead of the earnings. Fastenal has long been a favorite among income investors, consistently paying quarterly dividends over the past several years. However, considering the recent slowdown in industrial activity and market challenges, the stock looks overvalued.
Q4 Report on Tap
When the company reports fourth-quarter results on January 17, before the opening bell, Wall Street will be looking for a year-over-year increase in sales and profit. Analysts’ consensus earnings estimate for Q4 is $0.48 per share, compared to $0.46 per share in the fourth quarter of 2023. It is estimated that sales increased by 5% annually in the December quarter to $1.84 billion.
Fastenal is a market leader in industrial and construction supplies with a large distribution network, offering diversified solutions. It has a long history of stable sales performance and growing profitability, with the business benefiting from the continued increase in Onsite locations. However, financial performance fluctuates due to the cyclical nature of the business, depending on trends in manufacturing and construction activity. The slowdown in daily sales growth in recent years has been a concern, mainly reflecting weaker sales of fasteners amid a general slump in industrial production.
Fastenal’s CFO Holden Lewis, who will be stepping down in April this year, said at the Q3 earnings call, “Our full year anticipated net capital spending range remains $235 million to $255 million that we currently are trending towards the bottom of this range. The projected increase in net capital spending for the full year of 2024 is driven by higher outlays for hub automation and capacity, the substantial completion of an upgraded distribution center in Utah, and an increase in FMI spend to support increased signings.”
Q3 Results
In the September quarter, Fastenal’s sales increased 4% year-over-year to $1.91 billion, with net daily sales growing 1.9%. The company signed 93 new onsite locations and ended the quarter with a total of 1,986 active sites. Net income was $298.1 million or $0.52 per share in the third quarter, compared to $295.5 million or $0.52 per share in the same period of 2023. Earnings slightly beat the Street view while sales matched expectations.
The stock’s last closing price is broadly in line with its 12-month average value. FAST was trading up 1% on Friday afternoon after gaining 15% in the past six months.