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Fastenal (FAST) to Report Q1 Earnings: What's in Store?

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Fastenal Company (FAST - Free Report) is scheduled to report first-quarter 2021 results on Apr 13, before the opening bell.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 3% and 2%, respectively. On a year-over-year basis, earnings and revenues grew 6.4% and 9.6%, respectively.

Fastenal’s earnings topped the consensus mark in all the last four quarters, with the average being 6.3%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at 37 cents over the past 60 days. The estimated figure indicates 5.7% growth from the year-ago level. The consensus mark for revenues is pegged at $1.43 billion, suggesting a 4.9% increase from the year-ago reported figure of $1.37 billion.

Fastenal Company Price and EPS Surprise

Fastenal Company Price and EPS Surprise

Fastenal Company price-eps-surprise | Fastenal Company Quote

Key Factors to Note

Improved End-Market Demand: This national wholesale distributor of industrial and construction supplies is likely to have witnessed improved end-market demand in the first quarter. Although weather played a spoilsport in February, it is likely to have witnessed demand recovery in March, given controllable supply chain disruptions. Higher production, increasing capital expenditures and deferred maintenance spending are expected to have boosted sales. Having said that, lack of access to facilities and decision makers in light of COVID protocols may have been concerns.

If we go by the monthly sales report, average daily sales grew 1.5% to $21.9 million for February 2021 compared with 6.5% growth registered in January 2021 and 4.7% in the year-ago period. February 2021 growth was based on strength in safety (12.6% improvement) and growth in fastener sales (up 1.6%). Recovery in fasteners and non-residential customers is expected to reflect on March sales growth.

In terms of region, for the month of February, U.S. sales grew 3.6%, Canada/Mexico sales increased 12.1% and “rest of world” sales improved 8.3% year over year. By end market, manufacturing sales increased 6.2% and non-residential construction sales gained 4.9%, as stated by the company. Safety sales continued to drive the company’s top line, which increased 12.6% from the prior-year period. Notably, fasteners improved 1.6% and “other” improved 4.9% from a year ago.

The Zacks Consensus Estimate for the company’s overall daily sales is pegged at $22.97 million, which indicates a sequential increase of 6.3% and year-over-year growth of 7.3%.

Margins: Fastenal’s changes in product and customer mix have been hurting gross margin for quite some time now. Negative customer/product mix — as a result of increased growth of lower-margin national accounts and safety products — along with lower proportion of higher-margin fasteners are expected to have affected its first-quarter gross margin. Also, rising freight and product costs might have been concerning. Nonetheless, rising non-safety mix is expected to have aided the company’s gross margins.

Furthermore, to offset the tariffs placed on products sourced from China to date, Fastenal has been successfully raising prices. The company has been undertaking additional steps to counter cost pressure and incremental tariffs, which are expected to reflect on the bottom line.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Fastenal this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Fastenal carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some companies in the Zacks Retail-Wholesale sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Advance Auto Parts, Inc. (AAP - Free Report) has an Earnings ESP of +17.09% and a Zacks Rank #3.

Builders FirstSource, Inc. (BLDR - Free Report) has an Earnings ESP of +14.91% and holds a Zacks Rank #3.

Big Lots, Inc. (BIG - Free Report) has an Earnings ESP of +2.88% and a Zacks Rank #3.

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