Summary
Fastenal Company (FAST) reported a strong third quarter and nine-month period ending September 30, 2018, characterized by robust sales growth driven by both underlying market demand and successful execution of growth initiatives like industrial vending and Onsite services. Net sales increased by 13.0% for the third quarter and 13.1% for the nine months compared to the prior year periods. Diluted earnings per share (EPS) saw a significant increase, reaching $0.69 in Q3 2018 and $2.03 for the nine months, up from $0.50 and $1.48 respectively in the prior year. This EPS growth was notably bolstered by the positive impact of the Tax Cuts and Jobs Act (TCJA), which lowered the effective tax rate. Despite strong top-line performance, the company experienced a slight contraction in gross profit margin, primarily attributed to a shift in product and customer mix, increased freight costs, and product cost inflation that outpaced pricing actions. However, operating and administrative expenses as a percentage of net sales improved, demonstrating effective cost management. The company also highlighted its continued investment in growth drivers, including employee headcount and in-market locations, while also managing its capital structure through dividends and share repurchases. Investors should note the potential impact of recent tariffs on goods from China and the company's ongoing efforts to mitigate these effects.
Financial Highlights
51 data points| Revenue | $1.28B |
| Cost of Revenue | $664.00M |
| Gross Profit | $615.80M |
| SG&A Expenses | $353.80M |
| Operating Income | $262.30M |
| Interest Expense | $3.00M |
| Net Income | $197.60M |
| EPS (Basic) | $0.17 |
| EPS (Diluted) | $0.17 |
| Shares Outstanding (Basic) | 1.15B |
| Shares Outstanding (Diluted) | 1.15B |
Key Highlights
- 1Net sales increased by 13.0% year-over-year in the third quarter of 2018 and 13.1% for the first nine months.
- 2Diluted EPS rose significantly to $0.69 in Q3 2018 and $2.03 for the nine months, up from $0.50 and $1.48 respectively in the prior year.
- 3The Tax Cuts and Jobs Act (TCJA) provided a notable benefit, reducing the effective tax rate and contributing approximately $0.12 to Q3 2018 EPS growth and $0.36 to nine-month EPS growth.
- 4Gross profit margin slightly declined due to product/customer mix shifts, higher freight costs, and product cost inflation outpacing price increases.
- 5Operating and administrative expenses as a percentage of net sales improved, indicating operational leverage and cost control.
- 6Investments in growth initiatives continued, with a significant increase in Onsite locations and industrial vending devices.
- 7The company is monitoring and evaluating strategies to address the impact of new tariffs on products from China.