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Fastenal (FAST) Stock Up on Q1 Earnings and Sales Beat
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Fastenal Company’s (FAST - Free Report) shares gained 5.4%, following the release of first-quarter 2020 results. The top and bottom lines topped the respective Zacks Consensus Estimate despite continued slower activity levels. Moreover, activity levels weakened significantly in the second half of March, in response to societal actions that were undertaken to address the coronavirus pandemic.
Earnings & Sales in Detail
The company reported earnings of 35 cents per share, which beat the consensus mark of 34 cents by 2.9%. The reported figure also increased from the year-ago profit level of 34 cents per share.
Net sales during the reported period were $1,367 million, beating the consensus mark of $1,364 million by 0.2% and increasing 4.4% from the year-ago figure of $1,309.3 million. The growth was driven by higher unit sales, primarily related to growth drivers, with notable contributions from industrial vending and Onsite locations. Also, higher sales of certain products later in the quarter related to the coronavirus pandemic also contributed to the increase.
It reported daily sales growth of 2.8%, lower than 12.2% and 3.7% increase registered in the first and fourth quarters of 2019, respectively, as end-market activity continued to slow down in the quarter.
On a monthly basis, daily sales improved 3.6%, 4.7% and 0.2% in January, February and March compared with 13.3%, 10.5% and 12.7%, respectively, in the comparable months of the prior year.
Notably, 50% of the business relates to fastener and safety products. Together, these two product lines grew 4.3% on a daily basis in the quarter.
Daily sales of Fastener products (mainly used for industrial production and accounting for 32.9% of first-quarter sales) declined 2.6% year over year. Sales of safety products (accounting for 19.8% of first-quarter sales) grew 18.4% on a daily basis. Sales of remaining products (accounting for 47.3% of first-quarter sales) grew 1.6% on a daily basis.
In addition, the company’s manufacturing and non-residential construction end markets were down 1.1% and 7.8% on a daily basis, respectively, in the quarter. Nonetheless, the government business was up 31.1% on a daily basis. Moreover, sales to healthcare organizations more than doubled during the quarter.
Fastenal Company Price, Consensus and EPS Surprise
As of Mar 31, 2020, Fastenal operated 92,124 vending machines, up 10.4% year over year. During the quarter, the company signed 4,798 machine contracts, down from 5,603 reported in the year-ago period.
Fastenal signed 85 new Onsite locations during first-quarter 2020. The metric was 105 in first-quarter 2019. As of Mar 31, 2020, the company had 1,179 active sites, up 24.8% from the comparable year-ago period. Daily sales to national account customers (representing 55.4% of total revenues) increased 5.5% on a year-over-year basis during the quarter.
Margins Hurt by Higher Costs
Gross margin of 46.6% in the quarter contracted 110 basis points (bps) from the prior-year period due to changes in product and customer mix, and freight.
Also, operating margin contracted 10 bps year over year to 19.9% in the quarter, owing to lower gross margin.
Operating and administrative expenses (including gains from sales of property and equipment) — as a percentage of net sales — improved 110 bps year over year to 26.7% in first-quarter 2020, owing to the company’s ability to leverage employee, occupancy, and general corporate expenses.
Financials
Cash and cash equivalents were $160.7 million as of Mar 31, 2020, down from $174.9 million on Dec 31, 2019. Long-term debt at the end of the quarter was $450.1 million, up from $342 million at 2019-end.
In the first quarter, cash provided by operating activities totaled $241.1 million, up from $204.9 million in the comparable year-ago period.
Zacks Rank
Fastenal — which shares space with Builders FirstSource, Inc. (BLDR - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and BMC Stock Holdings, Inc. in the Zacks Building Products – Retail industry — currently carries a Zacks Rank #4 (Sell).
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Fastenal (FAST) Stock Up on Q1 Earnings and Sales Beat
Fastenal Company’s (FAST - Free Report) shares gained 5.4%, following the release of first-quarter 2020 results. The top and bottom lines topped the respective Zacks Consensus Estimate despite continued slower activity levels. Moreover, activity levels weakened significantly in the second half of March, in response to societal actions that were undertaken to address the coronavirus pandemic.
Earnings & Sales in Detail
The company reported earnings of 35 cents per share, which beat the consensus mark of 34 cents by 2.9%. The reported figure also increased from the year-ago profit level of 34 cents per share.
Net sales during the reported period were $1,367 million, beating the consensus mark of $1,364 million by 0.2% and increasing 4.4% from the year-ago figure of $1,309.3 million. The growth was driven by higher unit sales, primarily related to growth drivers, with notable contributions from industrial vending and Onsite locations. Also, higher sales of certain products later in the quarter related to the coronavirus pandemic also contributed to the increase.
It reported daily sales growth of 2.8%, lower than 12.2% and 3.7% increase registered in the first and fourth quarters of 2019, respectively, as end-market activity continued to slow down in the quarter.
On a monthly basis, daily sales improved 3.6%, 4.7% and 0.2% in January, February and March compared with 13.3%, 10.5% and 12.7%, respectively, in the comparable months of the prior year.
Notably, 50% of the business relates to fastener and safety products. Together, these two product lines grew 4.3% on a daily basis in the quarter.
Daily sales of Fastener products (mainly used for industrial production and accounting for 32.9% of first-quarter sales) declined 2.6% year over year. Sales of safety products (accounting for 19.8% of first-quarter sales) grew 18.4% on a daily basis. Sales of remaining products (accounting for 47.3% of first-quarter sales) grew 1.6% on a daily basis.
In addition, the company’s manufacturing and non-residential construction end markets were down 1.1% and 7.8% on a daily basis, respectively, in the quarter. Nonetheless, the government business was up 31.1% on a daily basis. Moreover, sales to healthcare organizations more than doubled during the quarter.
Fastenal Company Price, Consensus and EPS Surprise
Fastenal Company price-consensus-eps-surprise-chart | Fastenal Company Quote
Vending Trends and Other Growth Drivers
As of Mar 31, 2020, Fastenal operated 92,124 vending machines, up 10.4% year over year. During the quarter, the company signed 4,798 machine contracts, down from 5,603 reported in the year-ago period.
Fastenal signed 85 new Onsite locations during first-quarter 2020. The metric was 105 in first-quarter 2019. As of Mar 31, 2020, the company had 1,179 active sites, up 24.8% from the comparable year-ago period. Daily sales to national account customers (representing 55.4% of total revenues) increased 5.5% on a year-over-year basis during the quarter.
Margins Hurt by Higher Costs
Gross margin of 46.6% in the quarter contracted 110 basis points (bps) from the prior-year period due to changes in product and customer mix, and freight.
Also, operating margin contracted 10 bps year over year to 19.9% in the quarter, owing to lower gross margin.
Operating and administrative expenses (including gains from sales of property and equipment) — as a percentage of net sales — improved 110 bps year over year to 26.7% in first-quarter 2020, owing to the company’s ability to leverage employee, occupancy, and general corporate expenses.
Financials
Cash and cash equivalents were $160.7 million as of Mar 31, 2020, down from $174.9 million on Dec 31, 2019. Long-term debt at the end of the quarter was $450.1 million, up from $342 million at 2019-end.
In the first quarter, cash provided by operating activities totaled $241.1 million, up from $204.9 million in the comparable year-ago period.
Zacks Rank
Fastenal — which shares space with Builders FirstSource, Inc. (BLDR - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and BMC Stock Holdings, Inc. in the Zacks Building Products – Retail industry — currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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