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Time to Buy Fastenal (FAST) Stock After Earnings?

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As we kick off earnings season a few top-rated Zacks stocks have already reported this week. Among them, Fastenal (FAST - Free Report) ) stock is one for investors to consider.

Let’s see if it’s time to buy shares of Fastenal after reporting its fiscal first-quarter earnings today.  

Brief Overview

Fastenal is out of the Zacks Retail and Wholesale sector and its Building Products-Retail Industry is currently in the top 10% of over 250 Zacks industries. The most known companies in the space include Home Depot (HD - Free Report) ) and Lowe’s (LOW - Free Report) ).

As for Fastenal, the company is a national wholesale distributor of industrial and construction supplies that is known as an essential supplier of nuts and bolts. Headquartered in Minnesota, Fastenal distributes its products through company-owned stores mostly located in North America. 

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Q1 Review

Fastenal beat its first-quarter earnings expectations by 6% with EPS at $0.52. This was a 10% increase from the prior year quarter. Sales slightly topped quarterly estimates at $1.86 billion, up 5% from Q1 2022.

Fastenal cited 89 new onsite locations that were added during Q1 as growth drivers for the company. As of March 31, Fastenal had 1,674 active sites which represented a 16% YoY increase with the company stating daily sales grew roughly 20% from the prior-year quarter.

Operating cash flow also stood out at $388.5 million, climbing 69% from Q1 2022. This was largely attributed to global supply chains normalizing resulting in the reduction of working capital being used to support growth.

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Performance & Valuation

Fastenal stock is up +8% year to date to slightly top the S&P 500 and outperform Home Depot’s -9% and Lowe’s virtually flat performance. More impressive, shares of FAST are up +102% over the last five years to easily top the benchmark and Home Depot while only trailing Lowe’s +130%.

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Trading around $51 per share, Fastenal stock trades at 27X forward earnings which is nicely beneath its decade-long high of 40.7X and closer to the median of 26.3X. While investors are paying a premium for Fastenal stock compared to the industry average of 13.3X and the S&P 500’s 19X rising earnings estimates have started to offer support to the company’s P/E valuation and growth.

Growth & Outlook

Based on Zacks estimates, Fastenal earnings are projected to be up 3% in fiscal 2023 and rise another 6% in FY24 at $2.06 per share. Earnings estimate revisions have increased slightly over the last quarter and this may continue after the company’s solid Q1 report.

On the top line, sales are forecasted to rise 5% in FY23 and jump another 5% in FY24 to $7.77 billion. Fiscal 2024 would represent 46% growth from pre-pandemic levels with 2019 sales at $5.53 billion.

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Takeaway

Fastenal stock currently sports a Zacks Rank #2 (Buy) as earnings estimates have remained higher and this should likely continue after the company’s appeasing first-quarter results. Furthermore, Fastenal's Q1 report was reassuring to Wall Street as it showed inflation is beginning to ease along with supply chain issues which could give FAST shares a boost as we progress through 2023.


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Fastenal Company (FAST) - free report >>

Lowe's Companies, Inc. (LOW) - free report >>

The Home Depot, Inc. (HD) - free report >>

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