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Fastenal Q3 Earnings Beat on Expense Leverage, Sales Miss Estimates
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Key Takeaways
Fastenal's earnings rose 19.8% to 35 cents per share, beating estimates, while sales missed consensus.
Contract customer daily sales climbed 18.8%, while pricing added 240 bps to third-quarter sales growth.
Operating margin expanded 90 bps to 21.5%, as SG&A leverage helped offset gross margin pressure.
Fastenal Company (FAST - Free Report) reported mixed third-quarter 2026 results, with earnings beating the Zacks Consensus Estimate and net sales missing the same. Year over year, however, both metrics grew notably.
Customer contract wins and pricing actions supported growth, while expense leverage helped offset pressure from sales to larger accounts. Contract customer daily sales rose 18.8%, and operating margin expanded 90 basis points (bps) to 21.5%.
FAST stock lost 6.2% during today’s pre-market trading session after the announcement of the financial results.
Fastenal’s Q3 Earnings & Sales Highlights
Fastenal’s quarterly earnings of 35 cents per share surpassed the Zacks Consensus Estimate by 2.9% and increased 19.8% year over year from 29 cents per share.
Net sales rose 15.5% year over year to $2.46 billion but missed the consensus mark of $2.49 billion by 1%.
Fastenal Company Price, Consensus and EPS Surprise
Sales benefited from customer contracts signed since the first quarter of 2024 and a modest improvement in industrial production. Product pricing added approximately 240 bps to third-quarter sales growth. Currency movements created a roughly 10-bps headwind.
Contract customers accounted for 76.5% of revenues, up from 73.8% a year earlier. Non-contract daily sales increased 7.8%. The number of contracts rose 6.4% to 3,744, with signings weighted toward national multi-site accounts. Average customer sites generating at least $50,000 in monthly sales increased to 3,288 from 2,771. Sales from those sites grew 27.6% to $1.46 billion, highlighting the concentration of growth among larger customers.
Fastenal's Manufacturing Markets Lead Demand
Manufacturing contributed 76.6% of quarterly revenues, with daily sales rising 17.2%. Heavy manufacturing increased 20.2% and accounted for 44.6% of revenues, benefiting from key accounts in aerospace, machined products and industrial equipment. Other manufacturing daily sales advanced 13.2%.
Non-residential construction daily sales grew 12%, marking the sixth consecutive quarter of growth. Other end markets advanced 12.4%, helped by transportation and reseller customers. Total non-manufacturing daily sales increased 12.3%.
Direct material daily sales rose 18.6%, outpacing the 14.3% growth in indirect materials. Direct cutting tools and abrasives gained 19.5%, while direct non-fasteners and hardware increased 21.2%.
FAST's Digital Footprint Expands
Digital Footprint sales increased 16.1% to $1.54 billion and represented 61.4% of revenues compared with 61.3% a year ago. This measure includes sales through Fastenal Managed Inventory (FMI) technology and eBusiness transactions excluding overlapping orders.
FMI sales grew 14.6% to $1.12 billion, while eBusiness sales climbed 14.8% to $721.5 million. FASTBin and FASTVend sales increased 17.6% to $827.2 million, outpacing overall company growth. Fastenal signed 7,484 weighted FASTBin and FASTVend machine-equivalent units (MEUs), up 6.2%. The installed base reached 143,878 MEUs, up 7.4%, reinforcing its emphasis on automated inventory management.
Fastenal's Expense Leverage Lifts Profitability
Gross profit rose 14.4% to $1.1 billion, but gross margin declined approximately 40 bps to 44.8%. A mix shift toward large customers reduced gross margin by about 50 bps, while pricing relative to costs exerted a roughly 30-bps drag. That price-cost headwind narrowed about 10 bps from the preceding quarter. Sourcing savings, supplier rebates and tariff refunds provided relief.
SG&A expenses increased 9.4% to $573.9 million, below revenue growth. As a share of sales, SG&A improved 130 bps to 23.3%, supported by labor productivity and fixed-cost leverage. Operating income climbed 20.2% to $530.8 million, while net income increased 19.7% to $401.6 million.
Operating cash flow increased 9% year over year to $421.6 million, equaling 105% of net income compared with 115.3% a year ago. Higher receivables and inventory requirements absorbed cash as sales expanded. Year over year, accounts receivable increased 19.9%, inventories rose 3.1% and accounts payable advanced 29.3%.
Free cash flow, a non-GAAP measure, totaled $349.6 million compared with $332.1 million a year earlier. It represented 87.1% of net income, down from 99%. The company returned $328.4 million to shareholders through $298.2 million in dividends and $30.2 million in repurchases. Total debt ended the quarter at $100 million, down from $195 million a year ago.
Fastenal Maintains Capital Plan
Fastenal maintained its fiscal 2026 net capital investment expectation of $310-$330 million compared with $230.6 million in 2025. Spending priorities include replacing the Atlanta hub, improving distribution efficiency, completing delayed IT projects and adding trucking capacity. The company expects an ongoing tax rate of approximately 24.6%, absent discrete tax items or changes to tax law.
FAST’s Zacks Rank & Stocks With the Favorable Combination
Here are some companies from the Industrial Products sector, which according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.
Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +0.53% and a Zacks Rank of 2.
Eaton’s earnings topped the consensus mark in three of the last four quarters and met on the remaining occasion, with the average surprise being 1.3%. Earnings for the company’s third quarter of 2026 are expected to grow 15% year over year.
Kennametal Inc. (KMT - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank of 3.
Kennametal’s earnings topped the consensus mark in each of the last four quarters, with the average surprise being 29.3%. Earnings for the company’s third quarter of 2026 are expected to surge a whopping 682.4% year over year.
Watsco, Inc. (WSO - Free Report) has an Earnings ESP of +0.19% and a Zacks Rank of 3.
Watsco’s earnings topped the consensus mark in one of the last four quarters and missed on the remaining three occasions, with the average negative surprise being 4.9%. Earnings for the company’s third quarter of 2026 are expected to improve 3.8% year over year.
View the Zacks #1 Rank List
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Fastenal Q3 Earnings Beat on Expense Leverage, Sales Miss Estimates
Key Takeaways
Fastenal Company (FAST - Free Report) reported mixed third-quarter 2026 results, with earnings beating the Zacks Consensus Estimate and net sales missing the same. Year over year, however, both metrics grew notably.
Customer contract wins and pricing actions supported growth, while expense leverage helped offset pressure from sales to larger accounts. Contract customer daily sales rose 18.8%, and operating margin expanded 90 basis points (bps) to 21.5%.
FAST stock lost 6.2% during today’s pre-market trading session after the announcement of the financial results.
Fastenal’s Q3 Earnings & Sales Highlights
Fastenal’s quarterly earnings of 35 cents per share surpassed the Zacks Consensus Estimate by 2.9% and increased 19.8% year over year from 29 cents per share.
Net sales rose 15.5% year over year to $2.46 billion but missed the consensus mark of $2.49 billion by 1%.
Fastenal Company Price, Consensus and EPS Surprise
Fastenal Company price-consensus-eps-surprise-chart | Fastenal Company Quote
FAST's Contract Accounts Drive Sales Gains
Sales benefited from customer contracts signed since the first quarter of 2024 and a modest improvement in industrial production. Product pricing added approximately 240 bps to third-quarter sales growth. Currency movements created a roughly 10-bps headwind.
Contract customers accounted for 76.5% of revenues, up from 73.8% a year earlier. Non-contract daily sales increased 7.8%. The number of contracts rose 6.4% to 3,744, with signings weighted toward national multi-site accounts. Average customer sites generating at least $50,000 in monthly sales increased to 3,288 from 2,771. Sales from those sites grew 27.6% to $1.46 billion, highlighting the concentration of growth among larger customers.
Fastenal's Manufacturing Markets Lead Demand
Manufacturing contributed 76.6% of quarterly revenues, with daily sales rising 17.2%. Heavy manufacturing increased 20.2% and accounted for 44.6% of revenues, benefiting from key accounts in aerospace, machined products and industrial equipment. Other manufacturing daily sales advanced 13.2%.
Non-residential construction daily sales grew 12%, marking the sixth consecutive quarter of growth. Other end markets advanced 12.4%, helped by transportation and reseller customers. Total non-manufacturing daily sales increased 12.3%.
Direct material daily sales rose 18.6%, outpacing the 14.3% growth in indirect materials. Direct cutting tools and abrasives gained 19.5%, while direct non-fasteners and hardware increased 21.2%.
FAST's Digital Footprint Expands
Digital Footprint sales increased 16.1% to $1.54 billion and represented 61.4% of revenues compared with 61.3% a year ago. This measure includes sales through Fastenal Managed Inventory (FMI) technology and eBusiness transactions excluding overlapping orders.
FMI sales grew 14.6% to $1.12 billion, while eBusiness sales climbed 14.8% to $721.5 million. FASTBin and FASTVend sales increased 17.6% to $827.2 million, outpacing overall company growth. Fastenal signed 7,484 weighted FASTBin and FASTVend machine-equivalent units (MEUs), up 6.2%. The installed base reached 143,878 MEUs, up 7.4%, reinforcing its emphasis on automated inventory management.
Fastenal's Expense Leverage Lifts Profitability
Gross profit rose 14.4% to $1.1 billion, but gross margin declined approximately 40 bps to 44.8%. A mix shift toward large customers reduced gross margin by about 50 bps, while pricing relative to costs exerted a roughly 30-bps drag. That price-cost headwind narrowed about 10 bps from the preceding quarter. Sourcing savings, supplier rebates and tariff refunds provided relief.
SG&A expenses increased 9.4% to $573.9 million, below revenue growth. As a share of sales, SG&A improved 130 bps to 23.3%, supported by labor productivity and fixed-cost leverage. Operating income climbed 20.2% to $530.8 million, while net income increased 19.7% to $401.6 million.
FAST's Cash Generation Supports Shareholder Returns
Operating cash flow increased 9% year over year to $421.6 million, equaling 105% of net income compared with 115.3% a year ago. Higher receivables and inventory requirements absorbed cash as sales expanded. Year over year, accounts receivable increased 19.9%, inventories rose 3.1% and accounts payable advanced 29.3%.
Free cash flow, a non-GAAP measure, totaled $349.6 million compared with $332.1 million a year earlier. It represented 87.1% of net income, down from 99%. The company returned $328.4 million to shareholders through $298.2 million in dividends and $30.2 million in repurchases. Total debt ended the quarter at $100 million, down from $195 million a year ago.
Fastenal Maintains Capital Plan
Fastenal maintained its fiscal 2026 net capital investment expectation of $310-$330 million compared with $230.6 million in 2025. Spending priorities include replacing the Atlanta hub, improving distribution efficiency, completing delayed IT projects and adding trucking capacity. The company expects an ongoing tax rate of approximately 24.6%, absent discrete tax items or changes to tax law.
FAST’s Zacks Rank & Stocks With the Favorable Combination
Fastenal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are some companies from the Industrial Products sector, which according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported.
Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +0.53% and a Zacks Rank of 2.
Eaton’s earnings topped the consensus mark in three of the last four quarters and met on the remaining occasion, with the average surprise being 1.3%. Earnings for the company’s third quarter of 2026 are expected to grow 15% year over year.
Kennametal Inc. (KMT - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank of 3.
Kennametal’s earnings topped the consensus mark in each of the last four quarters, with the average surprise being 29.3%. Earnings for the company’s third quarter of 2026 are expected to surge a whopping 682.4% year over year.
Watsco, Inc. (WSO - Free Report) has an Earnings ESP of +0.19% and a Zacks Rank of 3.
Watsco’s earnings topped the consensus mark in one of the last four quarters and missed on the remaining three occasions, with the average negative surprise being 4.9%. Earnings for the company’s third quarter of 2026 are expected to improve 3.8% year over year.