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Fastenal Company (FAST - Analyst Report) is set to report its third-quarter fiscal 2013 results on Oct 9 before the market opens. Last quarter, it posted in-line results. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Fastenal’s top line has been soft since the past 4–5 quarters as the sales of its fasteners product line were being hurt by end-market slowdown and broader economic uncertainty. Moreover, the construction business has been soft for the past two quarters. Vending was also soft in the second quarter.

However, in early September, Fastenal announced encouraging sales results for the month of August which were a relief from the recent sluggish sales of the company. Management’s strategy of slowing down vending pace and instead focusing on improving near-term sales seems to be paying off as the August sales recovered from a slower July.

Moreover, the strategic decision to slow down store growth and instead increase headcount is also driving near-term sales growth.

In addition, Fastenal has plans to reinvigorate the high-margin fastener business and also improve sales performance at underperforming stores. Moreover, Fastenal hopes to gain from a new pricing system for stores and improved operational efficiency across its distribution network (by adding significant automation). Management expects these strategies to drive sales growth back to the historical high-teens range by the first quarter of 2014.

Earnings Whisper?

Our proven model does not conclusively show that Fastenal is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Earnings ESP) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP:  The Earnings ESP is 0.0%.  

Zacks Rank #3 (Hold): Fastenal carries a Zacks Rank #3 (Hold) which lowers the predictive power of ESP because a Zacks Rank #3 (Hold) when combined with a 0.0% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other building products/construction companies you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Liquidators Holdings, Inc. (LL - Snapshot Report), Earnings ESP of +1.52% and a Zacks Rank #1 (Strong Buy).

Stock Building Supply Holdings, Inc. (STCK - Snapshot Report), Earnings ESP of +57.14% and a Zacks Rank #3 (Hold).

D.R. Horton Inc. (DHI - Analyst Report), Earnings ESP of +2.44% and a Zacks Rank #3 (Hold).

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