Fastenal Puts Up Mixed First Quarter Results

Image: Fastenal reported mixed first quarter 2024 results. We like its business model quite a bit.

By Brian Nelson, CFA

On April 11, Fastenal Company (FAST) reported mixed first-quarter fiscal 2024 results with revenue and earnings per share coming in slightly lower than expectations. Net sales advanced 1.9% for the three-month period ending March 31. The company noted that adverse weather impacted sales in its first quarter by about 10 to 30 basis points on a net basis. Operating income nudged lower in the quarter modestly, while net income advanced 0.9% in the period on a year-over-year basis. Diluted earnings per share was roughly flat in the quarter on a year-over-year basis, increasing 0.6% from the same period a year ago.

Management pointed to expansion with larger customers and Onsite locations opened during the past couple years as the primary reasons for the revenue advance. Product pricing was not material to the company’s top line in the quarter, as it lapped strong product pricing in the same period a year ago. Fastenal continues to experience a divergence in its fastener business versus its non-fastener product lines, however. The company pointed to three reasons why:

First, fasteners are more heavily oriented toward production of final goods than maintenance, which results in greater susceptibility to periods of weaker industrial production. Second, pricing for fasteners has decelerated at a faster pace than non-fastener products. Third, while the rate of outgrowth has slowed relative to what we experienced during the final two months of 2023, we continued to experience relatively faster growth with our retailer-oriented customers due to market share gains, product mix, and easier comparisons. 

Fastenal also experienced a divergence in its manufacturing end market versus its non-manufacturing end markets in the quarter. Its daily sales rate [DSR] for heavy manufacturing advanced 17.6% in the quarter, while its DSR for total manufacturing increased 14.4%. Its non-residential and reseller end markets, however, experienced contraction in the period, but management noted that “they are beginning to come across easier comparisons in the preceding periods.” We like Fastenal’s business model quite a bit, and shares yield ~2.1% at the time of this writing.