Fastenal Company’s (FAST - Free Report) earnings of 50 cents per share in the third quarter of 2017 were in line with the Zacks Consensus Estimate. Earnings also grew 13.4% year over year.
Net sales of $1.13 billion were in line the Zacks Consensus Estimate. Sales grew 11.8% year over year driven by higher units owing to improvement in underlying market demand and growth in industrial vending business and existing Onsite locations.
Fastenal’s daily sales grew 13.6% in the quarter, better than the 10.6% increase in the second quarter of 2017.
On a monthly basis, daily sales increased 15.3% in September, 12.8% in August and 12.9% in July, compared with 2.8%, 0.3% and 2.1%, respectively, a year ago.
Sales of fastener products (used mainly for industrial production and accounting for approximately 35.6% of the company’s third-quarter sales) increased 12.1% in the quarter, 3.8% of which came from the acquisition of the Manufacturers Supply Company (Mansco) business. Non-fastener product sales (used mainly for maintenance and represented 64.4% of the quarterly sales) increased 14.6%.
Fastenal Company Price, Consensus and EPS Surprise
Vending Trends and Other Growth Drivers
As of Sep 30, 2017, Fastenal operated 69,058 vending machines, up 14.3% year over year. During the quarter, the company signed 4,771 machine contracts, in line with the year-ago figure.
After a soft 2013, vending trends improved through 2014, 2015 and 2016 as management’s efforts to enhance the quality of signings/installs paid off.
Fastenal signed 81 new Onsite locations during the quarter, up 97.6% from 41 signings a year ago. As of Sep 30, 2017, the company had 555 active sites, representing an increase of 47.6%.
Additionally, Fastenal signed 42 new national account contracts in the third quarter (representing 48.7% of its total revenues in the quarter). Net sales from its national account customers grew 17.3% in the quarter on a year-over-year basis.
Gross margin of 49.1% in the third quarter of 2017 declined 20 basis points (bps) year over year owing changes in product and customer mix, the addition of Mansco (which has a lower gross profit product mix than the company), disruption owing to the recent hurricanes and commodity inflation.
Operating margin improved 20 bps year over year to 20.2% in the quarter, mainly driven by lower operating and administrative expenses.
Cash and cash equivalents were $133.4 million as of Sep 30, 2017, up from $112.7 million as of Dec 31, 2016. Long-term debt was $432 million, up from $379.5 million at the end of 2016.
Zacks Rank & Key Picks
Fastenal carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the industry are Lumber Liquidators Holdings, Inc (LL - Free Report) , Beacon Roofing Supply, Inc. (BECN - Free Report) and The Home Depot, Inc. (HD - Free Report) .
Lumber Liquidators sports a Zacks Rank #1 (Strong Buy) while the other two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lumber Liquidators is expected to see 73% growth in 2017 earnings.
Beacon Roofing is likely to witness 4.6% earnings growth in fiscal 2017.
Home Depot expects earnings growth of 13.3% in fiscal 2018.
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