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Should You Buy Fastenal (FAST) Stock Ahead of Q3 Earnings?

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Shares of Fastenal Company (FAST - Free Report) are up roughly 14% over the last three months. But FAST stock has dipped 3% in the last month in a sign that investors might be nervous about the industrial and construction supplies power. So, let’s see what we should expect from Fastenal’s Q3 financial results to understand if FAST stock might be worth buying before Wednesday.

Overview

Fastenal’s second-quarter revenues surged over 13%, driven by industrial vending and Onsite locations. The company signed 5,537 industrial vending devices last quarter, which marked a 13.4% jump. Investors should note that Fastenal’s vending business, which is essentially a vending machine for supplies, is expected to be a significant part of its future.

Meanwhile, the Minnesota-based company’s Onsite business grew significantly as well. Similarly, Fastenal’s Onsite business is exactly what its name implies. The company offers clients the chance to bring on a Fastenal team and products into their business. The firm signed 19% more Onsite clients last quarter to help Fastenal close the quarter with 761 active sites. This represented a nearly 57% surge from the year-ago period.

Price Movement & Valuation

Shares of FAST have dramatically underperformed the S&P 500 over the last five years, up roughly 20% compared to the index’s nearly 80% climb. With that said, the past 36 months have been much more kind to Fastenal, with its shares up 45% compared to the S&P’s 43%.

We can also see that FAST stock has performed rather well over the last year and crushes its peer group, which includes Lowe’s (LOW - Free Report) , Lumber Liquidators (LL - Free Report) , and Home Depot (HD - Free Report) . Shares of Fast jumped as high as $56.89 on Monday, which falls below their 52-week high of $61.14.

 

FAST stock is currently trading at 20.6X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared to its industry’s 25.4X average. Furthermore, Fastenal stock has traded as high as 28.4X over the last year, with a one-year median of 21.5X. This means that Fastenal’s valuation picture appears pretty attractive at its current level.

Outlook & Earnings Trends

Our current Zacks Consensus Estimate is calling for Fastenal’s Q3 revenues to jump by 12.3% to hit $1.27 billion. Meanwhile, the company’s full-year revenues are projected to reach $4.93 billion, which would also mark a 12.3% climb over fiscal 2017.

At the other end of the income statement, the company’s adjusted quarterly earnings are expected to soar 34% to hit $0.67 per share. Fastenal’s full-year EPS figure is expected to expand by 33.6% to touch $2.56.    

The industrial and construction supplies firm has also received multiple upward earnings estimate revisions for Q3, fiscal 2018, and fiscal 2019 over the last 30 days, with 100% agreement to the upside.  

Bottom Line

Fastenal is currently a Zacks Rank #2 (Buy) based on its positive earnings revision activity. The company also sports “B” grades for both Growth and Momentum in our Style Scores system. Therefore, FAST stock might be worth buying ahead of its quarterly earnings release.

Fastenal is scheduled to release its Q3 financial results before the market opens on Wednesday, October 10.

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