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Fastenal Company (FAST) Signs Agreement to Take Over Mansco
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Fastenal Company (FAST - Free Report) has signed an agreement to acquire assets of Manufacturer's Supply Company (Mansco), based in Hudsonville, MI. However, the terms of the deal have not been disclosed.
The deal, which is expected to close by the end of March, will boost Fastenal’s market footprint with commercial furniture Original Equipment Manufacturers or OEMs. On the other hand, it will provide Mansco with additional tools to serve its customer base.
Mansco had generated 2016 sales of approximately $50 million, largely from its flagship Michigan location. The company also has been generating sales at two other facilities in Madison, AL, and McAllen, TX. Fastenal believes that this transaction will likely be accretive to its financials in the first twelve months, though it should not be material to earnings per share.
Based in Winona, MN, Fastenal is a national wholesale distributor of industrial and construction supplies. The company has gradually grown from a fastener distributor to a full-line industrial supplier. It has expanded its product lines to include an internal manufacturing division, government sales, Internet sales, metalworking and industrial vending.
If we take a closer look at Fastenal’s fourth-quarter earnings release, the top line was soft since 2015 and continued to experience a slowdown throughout 2016, including a contraction of 2.4% in the fourth quarter of 2016.
Again, lack of inflation, unfavorable product mix (less fasteners which generate higher margins), strong emphasis on growing average store sales, pricing and competitive pressure are hurting gross margins. Though gross margin improved 50 basis points (bps) sequentially in the fourth quarter, it was still down 10 bps year over year. Overall, 2016 gross margin dropped 80 basis points from the 2015 level.
Considering the above factors, the latest acquisition is expected to drive the company’s revenues.
Stock Performance
Shares of Fastenal gained over 20% in the last six months, outperforming the 10.5% gain of the Zacks categorized Building Products - Retail/Wholesale industry. Estimates for the current year and the next moved up over the last 30 days. The company’s cost-control initiative (Pathway to Profit) and increased vending machine installations to boost sales should drive the stock’s performance in the upcoming quarters as well. Its long-term (3-5 year) EPS growth rate is pegged at 16.3%.
Management indicated that the company is in “a stable margin environment” as it believes that recent improvements in margins on non-fasteners in the fourth quarter, a higher mix of sales of exclusive brands and better purchasing can continue to offset the ongoing mix headwinds. Additionally, recent increases in steel and other commodity prices add to the positives. If the company manages to check gross margin erosion in a low-growth environment, its stock price should reflect the same.
Zacks Rank & Key Picks
Fastenal carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Pier 1 Imports, Inc. , Williams-Sonoma, Inc. (WSM - Free Report) and GMS Inc. (GMS - Free Report) .
Pier 1 has an impressive earnings surprise history, beating estimates in three of the last four quarters at an average of 23.21%.
Williams-Sonoma is expected to see earnings growth of 1.1% in the current year.
GMS is expected to see earnings growth of 19.1% in the current year.
Williams-Sonoma and GMS carry a Zacks Rank #2 (Buy).
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Fastenal Company (FAST) Signs Agreement to Take Over Mansco
Fastenal Company (FAST - Free Report) has signed an agreement to acquire assets of Manufacturer's Supply Company (Mansco), based in Hudsonville, MI. However, the terms of the deal have not been disclosed.
The deal, which is expected to close by the end of March, will boost Fastenal’s market footprint with commercial furniture Original Equipment Manufacturers or OEMs. On the other hand, it will provide Mansco with additional tools to serve its customer base.
Mansco had generated 2016 sales of approximately $50 million, largely from its flagship Michigan location. The company also has been generating sales at two other facilities in Madison, AL, and McAllen, TX. Fastenal believes that this transaction will likely be accretive to its financials in the first twelve months, though it should not be material to earnings per share.
Based in Winona, MN, Fastenal is a national wholesale distributor of industrial and construction supplies. The company has gradually grown from a fastener distributor to a full-line industrial supplier. It has expanded its product lines to include an internal manufacturing division, government sales, Internet sales, metalworking and industrial vending.
If we take a closer look at Fastenal’s fourth-quarter earnings release, the top line was soft since 2015 and continued to experience a slowdown throughout 2016, including a contraction of 2.4% in the fourth quarter of 2016.
Again, lack of inflation, unfavorable product mix (less fasteners which generate higher margins), strong emphasis on growing average store sales, pricing and competitive pressure are hurting gross margins. Though gross margin improved 50 basis points (bps) sequentially in the fourth quarter, it was still down 10 bps year over year. Overall, 2016 gross margin dropped 80 basis points from the 2015 level.
Considering the above factors, the latest acquisition is expected to drive the company’s revenues.
Stock Performance
Shares of Fastenal gained over 20% in the last six months, outperforming the 10.5% gain of the Zacks categorized Building Products - Retail/Wholesale industry. Estimates for the current year and the next moved up over the last 30 days. The company’s cost-control initiative (Pathway to Profit) and increased vending machine installations to boost sales should drive the stock’s performance in the upcoming quarters as well. Its long-term (3-5 year) EPS growth rate is pegged at 16.3%.
Management indicated that the company is in “a stable margin environment” as it believes that recent improvements in margins on non-fasteners in the fourth quarter, a higher mix of sales of exclusive brands and better purchasing can continue to offset the ongoing mix headwinds. Additionally, recent increases in steel and other commodity prices add to the positives. If the company manages to check gross margin erosion in a low-growth environment, its stock price should reflect the same.
Zacks Rank & Key Picks
Fastenal carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Pier 1 Imports, Inc. , Williams-Sonoma, Inc. (WSM - Free Report) and GMS Inc. (GMS - Free Report) .
Pier 1 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Pier 1 has an impressive earnings surprise history, beating estimates in three of the last four quarters at an average of 23.21%.
Williams-Sonoma is expected to see earnings growth of 1.1% in the current year.
GMS is expected to see earnings growth of 19.1% in the current year.
Williams-Sonoma and GMS carry a Zacks Rank #2 (Buy).
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>