Fastenal’s Revenue Beat a Positive Read Through to the Broader Economy

Image: Fastenal’s second quarter results were a positive read through to the broader economy.

By Brian Nelson, CFA

On July 12, Fastenal Company (FAST) reported mixed second quarter results where revenue modestly exceeded the consensus forecast, while the company’s GAAP earnings per share was in-line. For the first six months of 2024, net sales advanced 1.8%, while operating income fell 1.4% and net income dropped 0.5%. Diluted earnings per share of $1.03 for the first six months of the year was 0.7% lower than the mark achieved over the same period a year ago.

During the second quarter, the company “experienced higher unit sales…primarily due to growth with larger customers and Onsite locations opened in the last two years.” Fastenal experienced lower product pricing in the quarter to the tune of 30 to 60 basis points driven in part by lower transportation costs and “lower pricing in certain safety and other products categories.” Fastenal gave three reasons for the divergence in the performance of its fastener versus non-fastener product lines, the latter showing relative strength:

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, we continued to experience relatively faster growth with warehousing customers due to market share gains, product mix, and easier comparisons. This factor primarily benefited our safety product line. 

Fastenal also experienced “a modest divergence in the performance of (its) manufacturing end market versus (its) non-manufacturing end markets in the second quarter of 2024.” Management noted that relative strength with key account customers with significant managed spend disproportionately benefited its manufacturing customers. Fastenal experienced strength in its national account customers, where its daily sales rate [DSR] expanded 5.8% in the second quarter. Fastenal’s better-than-expected revenue performance is a positive read through to the broader economy.