Fastenal Q3 Earnings Preview

(RTTNews) - Industrial and construction supplies provider Fastenal Co. (FAST) is slated to release its third-quarter results before the market opens on Tuesday, October 13. Analysts polled by Thomson Reuters have a consensus earnings estimate of $0.47 per share on revenue of $1.01 billion for the quarter.

In the last quarter, the company reported better-than-expected profit, reflecting improved operating margins and net sales growth. However, quarterly net sales missed analysts' estimate by a whisker.

To Consider...

Slumping industrial demand, caused weak oil prices, continues to coerce Fastenal's top-line growth.

The change in currencies in foreign countries, primarily Canada, relative to the United States dollar impacted the company's net sales growth over the last several years. During the years 2013 and 2014, it lowered Fastenal's net sales growth by 0.2% and 0.5%, respectively. In the first six months of 2015, it lowered its net sales growth by 1.0%.

Daily sales grew 3.2% in July that weakened to 1.6% in August. Daily sales were impacted by currency fluctuations, which had an unfavorable impact of 1.4% in August and 1.3% in July.

Q2 Performance

The Winona, Minnesota-based company's second-quarter net income was $140.36 million or $0.48 per share, higher than the previous year's $130.51 million or $0.44 per share.

On average, 12 analysts polled by Thomson Reuters expected earnings of $0.47 per share for the quarter. Analysts' estimates typically exclude certain special items.

Net sales increased 5.0% to $997.83 million from $949.94 million in the same quarter of last year, but missed eleven Wall Street analysts' consensus estimate of $1.01 billion.

Sales were boosted mainly from higher unit sales, while it was impacted by minimal price changes in its non-fastener products and some price deflation in its fastener products, but the net impact was a drag on growth.

The company's monthly net sales for April grew 6.1%, May sales improved 5.3%, and June sales rose 3.7% from the same months of prior year.

Operating margin for the second quarter increased 80 basis points to 22.6% from last year's 21.8%, as operating and administrative expenses as a percentage of net sales decreased 140 basis points, partially offset by a 50 basis points decline in gross margin.

Recent Happenings

October 8, Fastenal signed an agreement to acquire certain assets of Fasteners Inc. a regional industrial and construction supply distributor with store locations in the states of Washington, Idaho, Oregon, and Montana. The agreement is expected to close by the end of this month.

"We feel this is a great opportunity to grow our operations within the Pacific Northwest," said Dan Florness, Executive Vice-President and CFO of Fastenal. "Fasteners Inc. shares our same core values of integrity and great customer service, and we believe they will be a great strategic fit within our shared geographic locations."

October 12, Fastenal said its board of directors declared a dividend of $0.28 per share to be paid in cash on November 24, 2015 to shareholders of record at the close of business on October 27, 2015.

Profile

Fastenal sells different types of industrial and construction supplies in the following product categories: threaded fasteners and miscellaneous supplies; tools; metal cutting tool blades and abrasives; fluid transfer components and accessories for hydraulic and pneumatic power; material handling; storage and packaging products; janitorial, chemical and paint products; electrical supplies; welding supplies; safety supplies; metals, alloys and materials; and office supplies.

Fastenal operates about 2,600 stores located primarily in North America with additional locations in Asia, Europe, Central and South America, and Africa. The company operates 14 distribution centers in North America; eleven in the United States - Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California, Utah, North Carolina and Kansas, and three outside the United States - Ontario, Canada; Alberta, Canada; and Nuevo Leon, Mexico.