Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On May 17, we maintained a Neutral recommendation on Fastenal Company (FAST - Analyst Report) following mixed first-quarter 2013 results. However, continuous weakness in its top line is disturbing.

Why the Neutral Recommendation?

This industrial and construction supplies company announced first-quarter 2013 results on Apr 10. Adjusted earnings of 37 cents per share were in line with the Zacks Consensus Estimate but grew 8.8% year over year, attributable to significant margin growth. Revenues however, grew only 4.9% and also missed the Zacks Consensus Estimate. The company continues to struggle with sales growth. Top-line growth was slower than company expectations in the quarter, hurt by one less selling day, soft fastener sales and global economic policy uncertainty.

Fastenal’s daily sales growth rates have been weak since the last 3 - 4 quarters mainly due to weakness in its fastener product line, which are being hurt by end-market slowdown and broader economic uncertainty. From more than 15% growth in the first quarter of 2012, the fastener product line, which accounts for more than 40% of company sales, dropped to 1.7% growth in the first quarter of 2013.

Estimates have mostly shown a downward trend after the announcement of first-quarter results. The Zacks Consensus Estimate for 2013 has gone down by 1.8% to $1.61 per share while that for 2014 has gone down by 2.1% to $1.87 over the last 60 days.

However, the strong gross margin improvement and easing comparisons ahead keep us optimistic. Despite an overall weak sales pattern, the company is seeing some progress around its vending program and is fast accelerating its vending contract signings and installations. We are also encouraged by Fastenal’s other growth drivers like government business and metalworking, which are gaining traction and could help achieve profitability in 2013 and beyond. We thus, remain on the sidelines on solid long-term fundamentals.

Other Stocks to Consider

Fastenal carries a Zacks Rank #4 (Sell). Some building product maker stocks that are worth a look include Lumber Liquidators Holdings, Inc. (LL - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy) and The Home Depot, Inc. (HD - Analyst Report) and Builders First Source, Inc. (BLDR - Snapshot Report), both carrying a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%