Summary
Fastenal Company (FAST) reported third-quarter results ending September 29, 2019, demonstrating continued sales growth driven by both market demand and strategic initiatives, though facing some margin pressure. Net sales increased by 7.8% year-over-year for the quarter, indicating resilience in its industrial and construction supply distribution business. However, gross profit margin saw a slight decline due to a shift in product and customer mix, increased product costs outpacing price adjustments, and rising freight expenses. Despite these margin headwinds, the company reported an 8.0% increase in net earnings for the quarter, partly aided by discrete tax gains. Key growth drivers, such as industrial vending devices and Onsite customer locations, continue to expand, contributing to sales growth but also influencing the product and customer mix. Management remains focused on controlling operating expenses, which improved as a percentage of sales, and is investing in capital expenditures to support growth initiatives, particularly in vending and Onsite services. The company anticipates an ongoing focus on its growth drivers while navigating a potentially slowing economic environment, as indicated by a declining Purchasing Managers Index. Investors should note the strategic expansion of Onsite locations and industrial vending devices, which are key to Fastenal's long-term growth strategy. While these initiatives are driving top-line growth, the associated changes in product and customer mix, coupled with external cost pressures (tariffs, freight), are impacting gross margins. The company's ability to manage these pressures through pricing and operational efficiencies will be crucial for future profitability.
Financial Highlights
51 data points| Revenue | $1.38B |
| Cost of Revenue | $728.00M |
| Gross Profit | $651.10M |
| SG&A Expenses | $369.20M |
| Operating Income | $281.90M |
| Interest Expense | $3.60M |
| Net Income | $213.50M |
| EPS (Basic) | $0.18 |
| EPS (Diluted) | $0.18 |
| Shares Outstanding (Basic) | 1.15B |
| Shares Outstanding (Diluted) | 1.15B |
Key Highlights
- 1Net sales for the third quarter of 2019 increased by 7.8% to $1.38 billion compared to the prior year period.
- 2Net earnings for the quarter rose by 8.0% to $213.5 million, with diluted EPS growing to $0.37 from $0.34.
- 3Gross profit margin decreased to 47.2% from 48.1% year-over-year due to product/customer mix shifts, lagged price increases on product costs, and increased freight expenses.
- 4Operating and administrative expenses as a percentage of net sales improved to 26.8% from 27.6% year-over-year.
- 5The company continues to expand its growth drivers, adding 84 new Onsite locations and 5,671 industrial vending devices in the quarter.
- 6Inventory levels increased by 13.4% year-over-year, supporting higher sales and expansion of vending and Onsite initiatives.
- 7Capital expenditures increased significantly, primarily for property and equipment to expand hub capacity, vending devices, and hub vehicles.