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Why Is Fastenal (FAST) Up 2.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Fastenal (FAST - Free Report) . Shares have added about 2.7% 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 Q4 Earnings and Sales Miss Estimates
Fastenal Company posted unsatisfactory results in fourth-quarter 2019. The top and bottom lines missed the respective Zacks Consensus Estimate due to continued slower activity levels. Moreover, this slowdown was exacerbated in December 2019 by holiday timing and longer-than-usual year-end plant shutdowns.
Earnings & Sales in Detail
The company reported earnings of 31 cents per share, which lagged the consensus mark of 32 cents by 3.1%. However, the reported figure increased 3.3% from the year-ago profit level of 30 cents.
Net sales during the reported period were $1,276.9 million, missing the consensus mark of $1,293.4 million by 1.3% but increasing 3.7% from the year-ago figure of $1,231.6 million. The growth was driven by higher unit sales, primarily related to growth drivers, with notable contributions from industrial vending and Onsite locations.
The company reported daily sales growth of 3.7%, lower than 13.2% and 6.1% increase registered in fourth-quarter 2018 and third-quarter 2019, respectively, as end-market activity continued to slow down in the quarter.
On a monthly basis, daily sales improved 4.3%, 5.7% and 1% in October, November and December compared with 12.4%, 12.3% and 14.5%, respectively, in the comparable months of the prior year.
Daily sales of Fastener products (mainly used for industrial production and accounting for approximately 33.6% of fourth-quarter sales) rose 1.8% year over year.
Non-fastener products’ daily sales (mainly used for maintenance and representing 66.4% of the quarterly sales) increased 5.1% year over year.
Vending Trends and Other Growth Drivers
As of Dec 31, 2019, Fastenal operated 89,937 vending machines, up 10.8% year over year. During 2019, the company signed 21,857 machine contracts, down from 22,073 reported in 2018. However, the metric in fourth-quarter 2019 was 5,144 compared with 4,980 contracts a year ago.
Fastenal signed 362 new Onsite locations during 2019 and 79 in fourth-quarter 2019. The metric was 336 in 2018 and 67 in fourth-quarter 2018. As of Dec 31, 2019, the company had 1,114 active sites, up 24.6% from the comparable year-ago period. Daily sales to national account customers (representing 54.8% of total revenues) increased 8.2% on a year-over-year basis during the quarter.
Higher Costs Hurting Margins
Gross margin of 46.9% in the quarter contracted 80 basis points (bps) from the prior-year period due to changes in product and customer mix, and freight.
Also, operating margin contracted 30 bps year over year to 18.7% in the quarter, owing to lower gross margin.
Financials
Cash and cash equivalents were $174.9 million as of Dec 31, 2019, up from $167.2 million on Dec 31, 2018. Long-term debt at the end of the quarter was $342 million, down from $497 million at 2018-end.
In 2019, cash provided by operating activities totaled $842.7 million compared with $674.2 million in the comparable year-ago period.
Company’s Views
Fastenal acknowledged the fact that overall activity in end-markets served slowed down in the quarter. This offset the continued double-digit growth of vending and onsite locations. The company projects to sign 22,000-24,000 vending devices in 2020.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, Fastenal has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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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Why Is Fastenal (FAST) Up 2.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Fastenal (FAST - Free Report) . Shares have added about 2.7% 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 Q4 Earnings and Sales Miss Estimates
Fastenal Company posted unsatisfactory results in fourth-quarter 2019. The top and bottom lines missed the respective Zacks Consensus Estimate due to continued slower activity levels. Moreover, this slowdown was exacerbated in December 2019 by holiday timing and longer-than-usual year-end plant shutdowns.
Earnings & Sales in Detail
The company reported earnings of 31 cents per share, which lagged the consensus mark of 32 cents by 3.1%. However, the reported figure increased 3.3% from the year-ago profit level of 30 cents.
Net sales during the reported period were $1,276.9 million, missing the consensus mark of $1,293.4 million by 1.3% but increasing 3.7% from the year-ago figure of $1,231.6 million. The growth was driven by higher unit sales, primarily related to growth drivers, with notable contributions from industrial vending and Onsite locations.
The company reported daily sales growth of 3.7%, lower than 13.2% and 6.1% increase registered in fourth-quarter 2018 and third-quarter 2019, respectively, as end-market activity continued to slow down in the quarter.
On a monthly basis, daily sales improved 4.3%, 5.7% and 1% in October, November and December compared with 12.4%, 12.3% and 14.5%, respectively, in the comparable months of the prior year.
Daily sales of Fastener products (mainly used for industrial production and accounting for approximately 33.6% of fourth-quarter sales) rose 1.8% year over year.
Non-fastener products’ daily sales (mainly used for maintenance and representing 66.4% of the quarterly sales) increased 5.1% year over year.
Vending Trends and Other Growth Drivers
As of Dec 31, 2019, Fastenal operated 89,937 vending machines, up 10.8% year over year. During 2019, the company signed 21,857 machine contracts, down from 22,073 reported in 2018. However, the metric in fourth-quarter 2019 was 5,144 compared with 4,980 contracts a year ago.
Fastenal signed 362 new Onsite locations during 2019 and 79 in fourth-quarter 2019. The metric was 336 in 2018 and 67 in fourth-quarter 2018. As of Dec 31, 2019, the company had 1,114 active sites, up 24.6% from the comparable year-ago period. Daily sales to national account customers (representing 54.8% of total revenues) increased 8.2% on a year-over-year basis during the quarter.
Higher Costs Hurting Margins
Gross margin of 46.9% in the quarter contracted 80 basis points (bps) from the prior-year period due to changes in product and customer mix, and freight.
Also, operating margin contracted 30 bps year over year to 18.7% in the quarter, owing to lower gross margin.
Financials
Cash and cash equivalents were $174.9 million as of Dec 31, 2019, up from $167.2 million on Dec 31, 2018. Long-term debt at the end of the quarter was $342 million, down from $497 million at 2018-end.
In 2019, cash provided by operating activities totaled $842.7 million compared with $674.2 million in the comparable year-ago period.
Company’s Views
Fastenal acknowledged the fact that overall activity in end-markets served slowed down in the quarter. This offset the continued double-digit growth of vending and onsite locations. The company projects to sign 22,000-24,000 vending devices in 2020.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, Fastenal has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Fastenal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.