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Fastenal Company (FAST - Analyst Report) is set to report fourth quarter 2012 results before the opening bell on January 17. Last quarter it posted in-line results. Let’s see how things are shaping up for this announcement.

Positive and Negative Factors to Consider

Fastenal’s daily sales growth rates in the second and third quarters of 2012 were lower than the first quarter as well as year-ago comparable periods. Daily sales growth rates of manufacturing customers (representing almost 50% of revenues) have declined sharply due to lower sales of its fasteners product line (used mainly for industrial production), which are being hurt by slowdown in end market and broader economic uncertainty. We believe that the shift of resources to Fastenal’s vending program (FAST Solutions) may also be hurting fastener sales and eventually affect margins.

The second quarter was very weak for Fastenal in terms of sales growth. However, the company did see signs of some improvement in demand in the third quarter. The construction market has somewhat bounced back while the manufacturing market has remained almost consistent. The company is also seeing some progress around its vending program.

No Improvement Expected in Fourth Quarter

The Zacks Consensus Estimate for the fourth quarter stands at 33 cents, while that for fiscal 2012 stands at $1.42.

Fastenal has beaten estimates only once in the last four quarters while meeting estimates the other three. Moreover, the stock has mostly seen downward estimate revisions in the past 60 days.

The Zacks Consensus Estimate for the fourth quarter has gone down by almost 3% over the last 90 days, since the announcement of the third quarter results. While that for fiscal 2012 have gone down by 0.7% and for fiscal 2013 have gone down by 1.2% over the same time frame.

The downward pressure on estimates signals that the fourth quarter might not be too different from the past two quarters despite some improvement in demand. Moreover, the stock carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

With the overall housing market improving steadily, there are many housing companies that are likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Lennar Corporation (LEN - Analyst Report), Earnings ESP of +20.9% and Zacks Rank #1 (Strong Buy)

Meritage Homes Corporation (MTH - Snapshot Report), Earnings ESP of + 9.52% and Zacks Rank #1 (Strong Buy)

ESP stands for Earnings Surprise Prediction which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate.

About Earnings ESP

Would you like to own more stocks likely to beat their next earnings report? And avoid stocks likely to disappoint?

If yes, then it’s time you learn about the Earnings ESP score available on Zacks.com.

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