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Fastenal (FAST) to Post Q2 Earnings: What's in the Cards?

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Fastenal Company (FAST - Free Report) is scheduled to report second-quarter 2024 results on Jul 12, before the opening bell.

In the last reported quarter, earnings and net sales missed the Zacks Consensus Estimate by 1.9% and 1%, respectively. In the first quarter, net sales increased year over year, whereas earnings remained flat from the year-ago figure.

Fastenal’s earnings topped the consensus mark in two of the last four quarters, met on one and missed on another occasion, with the average being 0.6%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has declined to 51 cents from 52 cents over the past seven days. The estimated figure indicates a 1.9% decrease from the year-ago level. The consensus mark for revenues is pegged at $1.93 billion, indicating a 2.4% increase from the year-ago reported figure of $1.88 billion.

Fastenal Company Price and EPS Surprise

Fastenal Company Price and EPS Surprise

Fastenal Company price-eps-surprise | Fastenal Company Quote

Key Factors to Note

Sales: The demand outlook for the broader manufacturing sector continues to show sluggishness.  However, the company has several factors working in its favor that are expected to have driven its quarterly sales growth. These include a significant number of large customers, a strong digital strategy, a balanced mix of onsite and offsite services and market share gains across various product categories. Despite challenging comparisons to the previous year, Fastenal's positive attributes are anticipated to have driven its growth.

If we go by the latest monthly sales report, May’s average daily sales (ADS) grew 1.5% to $29.9 million, improving from 0.7% growth in April 2024.

In terms of end markets/products/customers in May and April 2024, total manufacturing sales improved 4.4% (Heavy Manufacturing and Other Manufacturing) and 4.1% from the year-ago months, respectively. Non-residential construction declined 6.2% in May and 5.6% in April 2024. Fastener sales were down 4.1% in May and down 2.2% in April 2024. On the other hand, Safety sales increased 7.5% in May compared with 5.1% growth in April 2024. Other categories improved 3% in May and 1.2% in April 2024.

Our model predicts Fastenal’s overall daily sales to be $30.6 million for the second quarter, indicating an increase of 3.9% from $29.4 million reported a year ago.

Notably, Fastenal has been experiencing a divergence in the performance of Fastener versus its non-fastener product lines. Fasteners are more tied to final goods production, making them vulnerable to downturns in industrial production. Again, Fastener pricing has decelerated more rapidly compared to non-fastener products. Thirdly, although the growth rate has slowed compared to the final two months of 2023, the company is still experiencing faster growth with its retailer-oriented customers, attributable to market share gains, an improved product mix, and more favorable comparisons. This trend primarily benefits its safety product line.

Margins: Steel and freight expenses continue to decline. The company is focused on maintaining a balance between pricing and declining costs, aiming to eliminate any negative impact on the full-year margin.

The negative impact from the customer and product mix, high growth in the lower margin of Onsite and non-fastener products and lower product margins in certain other product categories are likely to have been headwinds. However, modestly positive price-cost (reflecting easing product cost) and favorable leverage of organizational/overhead costs might have partly offset the negatives.

Per our model, the gross margin for the quarter is expected to be 45.2%, down 30 bps from the year-ago figure. We expect total operating expenses to increase 4.6% to $483.8 million in the second quarter from a year ago.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for FAST this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of +0.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Fastenal carries a Zacks Rank #4 (Sell).

Stocks With the Favorable Combination

Here are some companies which, according to our model, have the right combination of elements to post an earnings beat on their respective quarters to be reported.

Deckers Outdoor Corporation (DECK - Free Report) has an Earnings ESP of +8.73% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DECK’s earnings topped the consensus mark in all the last four quarters, with the average being 42.82%. Earnings for the to-be-reported quarter are expected to grow 45.2% year over year.

Lithia Motors, Inc. (LAD - Free Report) has an Earnings ESP of +0.19% and a Zacks Rank #3.

LAD’s earnings topped the consensus mark in two of the last four quarters, with the average negative surprise being 2.3%. Earnings for the to-be-reported quarter are expected to decline 27.2% year over year.

Advance Auto Parts (AAP - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #3.

AAP’s earnings missed the consensus mark in all the last four quarters. Earnings for the to-be-reported quarter are expected to decrease 25.9% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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