Fastenal (FAST) February Sales Witness Sequential Increase

Fastenal Company FAST has come out with February sales report, wherein average daily sales grew 4.7% to $21.6 million from 3.6% and 1% growth registered in January 2020 and December 2019, respectively. In February 2019, daily sales grew 10.5%. Notably, daily sales on a seasonal basis were up 2.5% compared with the company’s benchmark (historical five-year average) of 1.2%. Hence, after missing normal seasonal patterns in January by 30 basis points (bps), Fastenal beat the seasonality by 130 bps in February.

On an organic constant-currency basis, average daily sales were up 4.9% from 3.5% in January. Foreign exchange affected February sales by 20 bps. Meanwhile, net sales grew just 4.7% year over year to $431.2 million. The figure was up from 3.6% net sales growth in January. Overall, growth rates have improved since a challenging December.

That said, at the company’s Orlando conference on Mar 5, Fastenal noted that it would be difficult to get a "true sense of demand" until March, primarily due to seasonality and weather.

From End-Market Perspective, Product Lines & Customers

From end-market perspective, manufacturing sales grew 6.2% during the month, lower than 11.6% growth a year ago. Non-residential construction jumped 4.9%, lower than 11% growth reported in February 2019.

Fastenal derives sales from fastener and other product lines. Fasteners growth slowed to 1.6% from and 8.7% in February 2019 but improved from 1.3% in January 2020. Non-fasteners grew 6.9%. It improved from 4.9% in January but declined from 11.9% in the year-ago month.

In terms of customer/channel, National account growth was 7%, given the fact that 62% of the top 100 accounts are expanding. Meanwhile, non-national accounts were down 1% year over year in the month.

Negative customer/product mix, as a result of increased growth of lower-margin national accounts and lower proportion of higher margin fasteners, has been impacting Fastenal’s gross margin since the past three years. However, contributions from industrial vending and Onsite locations are encouraging.

Fastenal — a Zacks Rank #3 (Hold) stock — remains optimistic about its performance in the forthcoming quarters, given improved pricing expectation. Since the beginning of 2020, shares of Fastenal have declined 5.7% against the industry’s 5.1% growth.



 

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are BMC Stock Holdings, Inc. BMCH, Builders FirstSource, Inc. BLDR and Lumber Liquidators Holdings, Inc. LL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BMC and Builders FirstSource’s earnings surpassed estimates in all the trailing four quarters, with the positive earnings surprise being 13.6% and 30%, respectively, on average.

Lumber Liquidators’ earnings for 2020 are expected to increase 29.3%.

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