Fastenal Company (FAST) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings. And welcome to the Fastenal Company’s 2021 First Quarter Earnings Results Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Ellen Stolts of Fastenal. Thank you. Please go ahead. Ellen Stolts: Welcome to the Fastenal Company 2021 first quarter earnings conference call. This call will be hosted by Dan Florness, our President and Chief Executive Officer; and Holden Lewis, our Chief Financial Quarter. The call will last for up to one hour and will start with a general overview of our quarterly results and operations, with the remainder of the time being open for questions-and-answers. Dan Florness: Thank you, Ellen, and good morning, everybody. And thank you for joining us for our Q1 earnings call. I will take you to -- we have our Annual Meeting a week from Saturday and because of that and too much -- most people’s great satisfaction, I will not tell a story this morning and we will get right into the quarter. If I go to page three of the flipbook, but rest assured, if you participate in our Annual Meeting next weekend, I will tell a story or two. If I go to page three of our flipbook, so our earnings -- diluted earnings per share were $0.37 in the quarter, an increase of 3.7%. Net sales were up 3.7% as well, on a daily basis, they were up 5.3%. Some things stand out for me when I think of this quarter, obviously, we had the storms in February and a massive storm, much more than we have seen in years past, but winter is like that. It has storms and it impacts our numbers. Probably the most meaningful impact though and larger than the storms was the fact that we had one less calendar day, 63 versus 64, I believe. And that might not seem like a big deal in the scheme of life, but we do about $23 million a day and that day we missed. Most of our expenses center on the month, whether it’s rent or payroll or things like that, they center on a period of time and so most of our expenses are still here despite the fact that we have one less day. So if I assume $0.30 to $0.40 of that $1 lost in that day, would flow to the bottomline. That’s about a $7 million to $9 million impact to the quarter and so can have a very meaningful impact. I point that out only because Q4 has a similar anomaly. Holden Lewis: Great. Thank you, Dan. Starting on slide five of the flipbook, total and daily sales were up 3.7% and 5.3%, respectively, in the first quarter of 2021. The severe storms that affected the U.S. in February reduced growth in the quarter by 50 basis points to 100 basis points. Demand improved for our traditional manufacturing and construction customers. For instance, manufacturing is up 5.6% in the first quarter, but accelerated to up 10.8% in March. Construction was down 7.5% in the first quarter but improved to flat in March. Fasteners are a great bellwether of activity, and as Dan noted, the rate of change between January and March of 2021 well exceeded the typical pattern. We saw similar patterns in vended safety products and total and heavy manufacturing industries. So, yes, comparisons began to ease in March, but even so, it’s clear that underlying demand growth is improving at an accelerating pace as well. Now the counterbalance to gains in our traditional business is moderating demand for COVID-related products. Daily sales of safety products were up 14.7% in the first quarter of 2021, but that slowed up 3.2% in March. We have seen daily sales of non-vended respirators and gloves, which were heavily pandemic-oriented ease over the past few months. Dan Florness: We have one other comment. Before we switch over to Q&A. In the last couple of quarters, I have shared with you our employee COVID numbers and I neglected to mention that earlier and I just wanted to run through these with you. So since the start of COVID-19, we have had 1,685 cases within the Fastenal Blue Team family. With just over 20,000 employees, that’s roughly 8.5% of our employees contracted COVID. I consider that a low number when you look at the fact that unlike many organizations, our employees didn’t have the luxury of being able to work out of a room in their basement or home office. Our employees go to work every day and work in a manufacturing facility, a distribution center, work in a branch or Onsite location or drive a truck and so they are actively engaged with customers in their environment. If I look at the peak, our peak period was November of 2020. We had 430 cases or roughly 86 per week. To give you a contrast, in March of 2021, we had 102 cases or 26 per week, a drop of 70%. We think that is a sign of what’s happening in the underlying marketplace and makes us bullish as we look out into 2021. We will switch over to Q&A now, please. Operator: Thank you. Our first question today is coming from Jake Levinson of Melius Research. Please go ahead. Jake Levinson: Good morning, everyone. Dan Florness: Good morning. Holden Lewis: Good morning. Jake Levinson: Just wanted to -- I know, Holden, you touched on pricing a little bit in the quarter, but maybe you can just give us a sense of what the pricing environment looks like more broadly? And if you can put a finer point on what you are expecting for either the next couple of quarters or the year? Holden Lewis: Yeah. I mean, I think, the way we described it was simply an environment where you are seeing an increase in costs around transportation. You are seeing it in steel. You are seeing it in fuel and that ultimately goes through plastics. So, I think, in general, we are seeing an inflationary environment and I suspect that that doesn’t surprise anybody. It also shouldn’t surprise anybody, I believe, that we are going to react to that a number of ways, but a part of that is going to involve pricing behavior. And so in the second quarter, we are going to have to institute some price increases as a means of mitigating things. So when I talked about the 60 basis points to 90 basis points of impact from price in the first quarter, I do expect that to be higher as we get into the second half of this year. Now will it be outside of our normal sort of 0% to 2% range? No. I don’t think it will be. I don’t think it’s anything of that order of magnitude and I think that our objectives remain the same. And that is to neutralize the impact on our margin and essentially stay even within the marketplace and I think those are our goals. But in order to do that, obviously, we will have to take actions, given where the market is today. I guess the good news, maybe let us call it the news is that right now our customers are really busy. Our customers are seeing these types of actions from a lot of different quarters and so there’s always a conversation. This is an environment where inevitably customers for -- within these supply chains start wondering if there’s other places that they could get a better piece price and that’s the kind of thing that happens in the marketplace and during periods of inflation. But we are not seeing anything unusual or different in the marketplace in terms of an inflationary environment than I think we have experienced in the past, and we expect to be able to manage through it. Jake Levinson: Yeah. That’s helpful color. Thanks. And maybe just as a follow-up and I know, obviously there’s some pretty well-publicized supply chain challenges out there. But has it changed how you guys are thinking about working capital, is there -- are you carrying extra buffer inventory or anything like that to kind of manage through the speed bumps, if you will? Dan Florness: You know what, here’s I’d say about that. If we could -- we were probably $15 million, maybe a little bit more light in the hubs versus what we would have expected to be going into the quarter. And the reason for that is because we simply couldn’t move product from where it was into our hubs as quickly as demand began to accelerate. And so to the question of, are we carrying a bunch of buffer inventory? No. I wouldn’t say that we are carrying a bunch of buffer inventory. I am not sure there’s a lot of buffer inventory in the channel. But what I think is impressive about what our field does is, culturally, we have always empowered individuals in our business units to make very independent decisions. And this is not the first time that they have been called upon to go out and source product where we haven’t been able to provide it out of the hub in certain cases. And when I sort of send out the survey to the RVPs, one of the comments that came through loud and clear is, whatever supply chain disruptions are happening at the customer level, it’s not because we aren’t getting them product. We are managing to source product locally in the field and we are continuing to keep up with things. But it does involve a lot more effort and time sourcing that product. But I think that’s one of the strengths of the organization and so supply chain is not unique to Fastenal in terms of the tightness that’s out there, but I think we are uniquely structured to manage it and navigate it. I think we saw that in Q1 and I think that’s good for a -- in terms of market share gains over time. It does have a little bit of a margin impact, right? I mean, sourcing outside our supply chain isn’t quite as profitable as sourcing within it and you saw some of that in the fastener line. But as we normalize the supply chain as you go through the year, to the extent we can, I think, you will see that effect moderate. Holden Lewis: I will just add a comment and that is when I think of environments like this historically, I -- as many of you know, I have a financial background. So being at an organization that has months of inventory on hand because of our network and how we operate while it’s an expensive way to operate, it’s also an incredibly resilient way to operate. I think that shined through in 2020. I think that has shined through in the years past when there’s a little bit of chaos going on in the supply chain. It allows us to be a little bit more agile because we do have some inventory on the shelf. What we are really seeing in changes is and I mentioned it to our own employees on an internal video. Historically, our supply chain team might be pinging branches with reorder points that are 90 days out, 100 days out, 110 days out. What our supply chain teams are doing, we are going out even further. We are going out into August and September and we are pinging folks and saying, hey, we might want to order this now. We might want to do some things now, get it in motion now because there are some disruptions. We want to be in queue for product. One thing that has historically helped us for being in queue for product, we are an organization that is known in the industry for being incredibly responsive to paying its bills. We have a strong cash position. We can move faster than anybody else as a result and that positions us well. And history has told, being in environments like this. I believe it tips to scale towards Fastenal a bit on its ability to take market share, because we will have inventory, we will have opportunities and abilities to move in the marketplace that some of our competitors won’t. And I am primarily talking about a lot of the more local competitors as opposed to some of the national players. Jake Levinson: That’s helpful. Thank you, guys. I will pass it on. Dan Florness: Thank you. Operator: Thank you. Our next question is coming from Chris Snyder of UBS. Please go ahead. Chris Snyder: Thank you. I guess starting with the $8 million PPE inventory write-down. Does this clear the decks, so to speak or is there a risk of additional write-downs in Q2, and then, could you maybe just help frame how you think about the gross margin trajectory as you move past that? Dan Florness: No. It doesn’t clear the decks. The fact is, it’s still a good product and it’s still moving. The only difference in the market is that the value of it relative to when we purchased it is lower today than it was and that’s just about market dynamics. So a full write-off of that wouldn’t have been appropriate or frankly necessary. So that’s probably how I’d characterize that. Holden Lewis: Only thing I would have to add is, masks were -- the 3-ply mask was a unique item for us. There aren’t other products that are like that and where we went out and bought that kind of supply and so from that standpoint, we have priced this now where it can more easily sell in the marketplace. Our local teams are motivated to grow their business and grow it profitably if we have expensive inventory itself and that could spend a lot of time trying to sell it and we want that inventory to turn. Holden Lewis: So I think your question was, in part, is there a risk of another write-down? I mean, the product that’s on the shelf is good product for the next 15 months and the expectation is that, we will be able to sell what’s remaining on our shelves over the course of that 15-month period. Chris Snyder: Appreciate that. And then, I guess, following up on the comments on supply chain disruption. If you look back to the Q2 ‘20 supply chain disruption, Fastenal seemingly took pretty material share with customers leaning on their -- the biggest suppliers. Are you seeing a similar dynamic in the current market with the port delays and whatnot? Holden Lewis: Well, we think that that potential is there. I would say the supply chain issues, pricing issues, those are more sort of run of the mill issues within distribution historically, whereas what occurred last year was generally unique and intense, right? So, I mean, on an order of magnitude, do I think that you are going to see $350 million to $360 million of sales that you wouldn’t have otherwise in this current environment? No. Nothing of that sort. But going back to what, Dan and I talked about a moment ago, the ability of our people in the field to be able to go out and find product independently to fill in gaps that we may have as our traditional supply chain is perhaps a little tight. I think that, that is an advantage to our business. It was an advantage last year, as Dan talked about. I mean, a lot of the customers that we source and things like that, there was a local element to that. I think it will be an advantage this year just because right now what our customers are concerned about as demand goes up is having a product available and the flexibility in our business and in our model. I think that’s going to provide us an advantage when making sure that service levels remain high and availability remains high, that I think it’s going to give us market share. But I wouldn’t expect anything so intense as what you saw last year at this time. Chris Snyder: I appreciate that. Dan Florness: Thank you. Operator: Thank you. Our next question is coming from David Manthey of Robert W. Baird. Please go ahead. David Manthey: Hi. Good morning, guys. Dan Florness: Hi, Dave. Holden Lewis: Good morning. David Manthey: So, first off, I -- pre-pandemic in, say, 2019, I believe safety was running about 17%, 18% of your mix. I am just wondering how you are thinking about where that mix percentage bottoms out, would it be reasonable to expect 18%, 19% in the second half and then resuming the secular incremental uptick from there or does the glide path from pandemic products and the cyclical recovery and the sort of shop floor personal protection stuff cause the safety mix to bottom closer to 20% or so? Dan Florness: Yeah. This is a guess, Dave, and I would be surprised to see it drop below 20%. And because there’s a group of customers that are now safety customers, there’s a group of customers that are expanded safety customers. And I have to believe as, even in the balance of 2021, I think, there’s going to be a lot thing, a lot of habits that formed that will continue as we go through the year and I will speak to firsthand knowledge of what some things we are doing. So roughly 93%, 94% of our employees can’t work remotely, I mentioned that earlier. Around 6% of our employees can work remotely, because they are in supporting roles. And we did ask -- strongly asked a lot of those folks to go home a year ago, because we wanted to create a safer environment for everybody else, the people that had to be here. We have folks that are coming back and we are doing a lot of things as far as putting up partitions and different things that we didn’t do over the last 12 months, because it wasn’t necessary because the rooms were empty. But we are putting up Plexiglas barriers and we are putting in a lot of sanitizing stuff, because people are returning to work. That’s going to create a core demand. But I’d be surprised to see a drop below 20%, and if it does, it’s because everything else grew faster than I am expecting. Holden Lewis: And maybe to put some numbers to that for you as well, Dave, the -- in the first quarter, we generated a little over $60 million in revenues from customers that had not purchased PPE from us prior to the second quarter of last year and that amounts to a little over 1% of our sales. And I think that amounts to market share gains and so when you think about where we were before and you think about those types of customers now being a part of our mix and contributing more than 1% to our -- to share, I think, that Dan’s right. We have always sort of thought 2021, 22% is probably where this settles out and I think that, that’s still right. David Manthey: Okay. Thank you for that. And second, could you discuss the general economics of bin stock compared to vending Onsite in terms of gross and operating margins, return on capital? Dan Florness: Well, the capital -- the cost of the device is much different. It’s -- what essentially -- and I will talk to the RFID, because that’s our -- that’s the biggest piece of it, at least it is currently. We will see if the IR beams within MRO bins, how big that becomes relative to it. But what it really is, is think of a Kanban system and in that Kanban system, right now what you have is somebody has to physically go out and observe empty bins or gather the empty bins. What really changes in an RFID environment is, when that bin is empty. There’s a -- think of it as a set of shelves and up above, there’s this open box and you put the bin up there and there’s an RFID tag that reads it and it tells our branch. It actually tells our supply chain team, we need to replenish this bin. And so, the biggest thing is the labor efficiency, but it also allows us to illuminate much more of the supply chain for the customer, so they can really see it and can operate a little bit leaner and we can reduce the inventory. I believe the inventory lean-up for our customer will fund the capital it takes for the actual devices because the only thing that’s really changing is the technology enablement. The bins are the bins, they were there before. You have an RFID tag on them. So the capital piece is relatively modest, except for the actual communication talking, but the economics are better than vending and the real reason is it becomes much more labor efficient to serve that business in the marketplace. David Manthey: Perfect. Thank you. Dan Florness: Thanks. Operator: Thank you. Our next question is coming from Ryan Merkel of William Blair. Please go ahead. Ryan Merkel: Hey. Thanks. Good morning, everyone. Dan Florness: HI, Ryan. Ryan Merkel: So, I guess, first question for Holden. Can you just update us on how to think about gross margins this year, just given the new headwinds on fasteners that you discussed? I think prior, Holden, you thought gross margins could be up slightly year-over-year in ‘21, is that still the case or do we need to rethink that? Holden Lewis: No. I don’t think there’s any need to rethink it. Again, we are taking actions to try to mitigate some of the pressures that we are seeing. I think the guidance that -- guidance is probably a strong word. But I think the suggestion that I made coming out of Q -- coming out of the last quarterly discussion was that, yeah, I expect gross margin to be up a little bit this quarter -- this year and but we are probably talking about 50 basis points or less. The flip side of that is SG&A leverage will come up against the difficult comps of last year and I would expect there to be marginal leverage on SG&A when you think about the comps and things of that nature. And then ultimately, what that translates into is an incremental margin for the year that’s kind of in the 20% to 25% range, and I think that was kind of what we discussed last quarter’s call, and honestly, I don’t think anything about that has changed. Ryan Merkel: Okay. That’s helpful. So it sounds like the increased headwinds on margins that you talked about because of the fill-in and the spot buy, that doesn’t sound like that’s meaningful. Holden Lewis: Well, I mean, fill-in buys -- no, it’s not meaning -- we are not talking about tens and tens of basis points here. It’s relatively small at this point. And again, we do believe that over the course of the year, we will smooth out the supply chain a bit, and of course, we will be taking pricing actions to mitigate some of those pressures as well, right? So, no, I don’t think that those are major matters. Ryan Merkel: Okay. Holden Lewis: This assumes that we execute… Ryan Merkel: Very helpful. Holden Lewis: This assumes we execute the strategies well, right? Ryan Merkel: Right. Okay. That’s helpful. I will pass it on. Thanks. Holden Lewis: Thanks. Dan Florness: Thanks, Ryan. Operator: Thank you. Our next question is coming from Adam Uhlman of Cleveland Research. Please go ahead. Adam Uhlman: Hi, guys. Good morning. Dan Florness: Hi, Adam. Adam Uhlman: Hey. I was wondering if we could go back to the discussion about the Onsite signings. Could you maybe expand on what you are seeing in the negotiations that led you to reduce the full year signings outlook? I guess, I wouldn’t have thought that the first half would have had big expectations for signings, maybe more of like a second half recovery, and then February, it was probably impacted by weather. I am just wondering what exactly you are hearing from your field guys there? Holden Lewis: Sure. So, if you recall, last quarter what we said is, we talked about a $375 million to $400 million, because we wanted to convey to people that we believe that’s what the market can support and we continue to believe that’s what the market can support. But we also said at the time that business conditions would have to meaningfully improve in order for us to achieve that. And whereas I do believe that business conditions have improved, they haven’t normalized to where they were pre pandemic at this point, and the fact is in Q1, we landed $68 million. And so to be on the type of pace that we would have to do to do closer to 400, given that we have booked 68 in quarter one, it just seems like a stretch. When the conditions haven’t fully normalized from where we were before, right? That’s the one area that I believe is still being affected by COVID-related accommodations. So, given that, I think that it was worth -- I mean, I think, we sort of, I think, gave indication that this seemed like a high potential scenario when we talked last quarter and it just seemed like a prudent thing to do. Now note, we have kind of said the same thing about FMI this quarter, right? We believe that the market can support 23,000 to 25,000 weighted FMI devices. But we are going to need to see the activity levels continue to improve even from where it was Q1 to get there. Right now we are probably pacing a little bit low. But I think the important thing to just reiterate is, I don’t think this has anything to do with the receptivity of the tools that we are providing in the marketplace. I don’t believe that there’s any belief on the part of our organization that we can’t achieve those levels. But the environment is still normalizing. It’s not there yet, and as a result, we may come in a little bit shorter, but the trend line is up. Dan Florness: Yeah. I am going to comment Adam… Adam Uhlman: Okay. Dan Florness: And Holden can be mad at me for this, Adam. When I was reading through Holden’s flipbook, I saw that he had put in that sentence about the 300 to 350 range. There are certain times I go into Holden and I tell him my with them and certain times I tell them I agree with them. So this is one where I don’t know that I agree with him. He’s probably right. But I don’t know if I agree with him. And that is, I think, if you look at first quarter, I believe 29 of our 68 signings were in the month of March. So it did tick up as we went through the quarter. Now that’s not an unusual pattern because January is usually tentative and February was weaker because of the storm, as you mentioned. I think the risk of signings this year is more about customers really being busy and they just can’t think about it right now. They just can’t do it right now. And I think that’s the risk of it not getting to that 100 per quarter pace and that’s the only reason I didn’t ask Holden to remove that sentence from both the earnings release and the flipbook. Otherwise, I’d ask him to remove it. Because I think the model is great, I think the market is receptive to it and I think we could ramp up faster. But there is that one risk that people are too busy to let it happen because change always takes energy and where do you want to prioritize your energy. But I am not completely in agreement with Holden on this one. But he’s -- if I were a betting person, he’s probably more right. But my message to our team internally is there’s no reason why in the second half of the year, we shouldn’t be at 100 a quarter. And the question is, can we get there in the month of or in the second quarter and I will happily be wrong. Adam Uhlman: Okay. Got you. Thanks. That’s very helpful. And then, secondly, back to the inventory discussion, I understand it’s been difficult to get inventories into the DCs. I guess, how much do you think inventories need to increase this year to support the growth that you expect, realizing that you have some other internal initiatives going on? Holden Lewis: Well, I know in Q1, obviously, we talked about the hubs being down $15 million-plus versus what we would have expected. And we need more product to make its way across and as it does, I would expect the hub inventories to rise. I am not sure that we have necessarily put a number to that and I think a lot of it’s going to depend on the degree to which demand continues to run the way that it is. So, but I do believe that we are light on inventory in the hubs. As inflation continues to run through, I think, that will put some upward pressure on values of inventory as well. So I am not sure I have a good answer for you in terms of what the ultimate number is. But that’s part of the answer to addressing what we are seeing in the supply chain and improving our service levels. But right now we are a little bit low on inventory, we are a little bit low on fulfillment levels and we need to correct that. And in Q1, it would have required $15 million more and I think that builds a little bit as you get into Q2 and the supply chain pressures build. Now that will be offset to some degree with the work that we are doing internally to take out slow and no moving inventory. In terms of reducing the branch count, which the field continues to take some of the branches out, that makes sense to them. Those sort, I think, when we talk a little bit about the customer fulfillment center, which is a form of branch, which has much more customized and tailored inventory. Those are all initiatives that I think are very sustainable. We will continue to mitigate the effects of supply chain over the course of the year. But right now our inventory would be better off in having a little bit more in it than it does and that’s going to motivate our work on improving the supply chain. Dan Florness: Just the one if I can add is… Adam Uhlman: Okay. Thank you. Dan Florness: …is just keep things in context, the $15 million that Holden cites, that’s about a day’s worth of inventory. So it’s a number. You have helped -- disclosing it was helpful, but in the context of things, we are blessed with an incredible supply chain and incredible resiliency as far as where the intake point is for inventory. The question is always the price point. But it’s a day’s worth of inventory. Operator: Thank you. Our next question is coming from Josh Pokrzywinski of Morgan Stanley. Please go ahead. Josh Pokrzywinski: Hey. Good morning, guys. Dan Florness: Hi, Josh. Holden Lewis: Good morning. Josh Pokrzywinski: Just back to -- good morning. Just back to, I think, Ryan’s earlier question, just to level set us on some of those gross margin considerations that you laid out last quarter. Holden, just with some of the dynamics that you talked about, which seem more acute in 2Q, particularly on like mix, price cost, maybe some of those still in buys still having to persist for a while. Should we think of that as maybe fair for the year, but a bit more of a second half dynamic than what you were considering before? I know that’s putting a pretty fine point on it, but just trying to sense like if there was some shift in the timing underneath that expectation, if not the total year number? Holden Lewis: No. I don’t think so. I am still trying to think through the question a little bit. I mean, we all know that we have a relatively easy comp on gross margin in 2Q and so I haven’t really tried to think about it in terms of year-over-year rate of change. I think if you take the first quarter gross margin, you adjust for the write-down, which is our intention is that, that will be focused on 1Q ‘21 and be done. Adjust for that, you are looking at a first quarter margin about 45.9%. If I move over to 2Q, normally second quarter would see a little bit of a decline sequentially from Q1. I think that, that could come in somewhere around flattish and part of the reason is the mix that you are talking about. Interestingly enough, right now, the fastener/non-fastener mix is normalizing faster than the Onsite/non-Onsite mixes. And so that actually moderated the impact of mix in Q1 and we will see how that plays out in Q2. But it’s possible that could be a little bit moderate as well and I think that contributes to that. And of course, assuming we are effective on pricing that can contribute as well. So when I think about the second quarter gross margins, I think it gets really messy to think about it year-over-year when we can kind of think about sequential patterns and try to run off of that. And I guess, I think -- when I think about Q2, instead of thinking about it in terms of the normal 20-basis-point decline, I think, that that could actually run a little bit more flattish and that would obviously be a meaningful increase year-over-year, but that’s just a comp issue. That help? Josh Pokrzywinski: Got it. That’s helpful perspective. Yes. That helps a lot. And then, I guess, sort of related to the supply chain tightness that Dan had talked about. Understanding there was a pretty big step-up in activity sequentially into March, presumably that that continues just as things reopen on the fastener side? I know growth isn’t really homogenous, it can come anywhere. But are there limits to being able to grow here in the short-term, so you talked about kind of flattish to maybe down a little bit in 2Q? But if everything went your way, is there really capacity to grow a lot faster, I mean, I guess, I am thinking back to some of the weather interruptions in 2Q and those customers not being able to make up days immediately. Is that something that’s sort of governed on the upside here, at least in the short-term until some of the supply chain stuff works out? Dan Florness: When I think of limit to growth, I think of demand, I do not think of supply. When you talked about in February, there was a number of things that caused problems. One was you had plants down there with no power for -- our distribution center in Dallas was shut down for five days because we didn’t have electricity. And so you had a lot of examples where -- I grew up in the north, I grew up in Wisconsin, so I realize that when temperatures get into the single digits, things freeze and you saw a lot of that. You had good plants that where there was no electricity and they weren’t operating and you had pipes freezing. You had hundreds and thousands of feet of pipes being replaced in a lot of facilities because they froze and they broke. And so the issue was one of the no power and then damage from the environment or no natural gas and essentially no energy to operate. That’s a different scenario than what we are describing here. Our limiting factor is demand and our ability to find more customers every day that want to use us as a supply chain partner. Holden Lewis: Yeah. Josh Pokrzywinski: Got it. Holden Lewis: And on some level as well… Josh Pokrzywinski: Appreciate it. Holden Lewis: Yeah. I mean, on some level as well. I mean, there are industries out there. I think the RVPs that are affected by auto talk about some lines shutting down because of availability of chips and things like that. So you might be referring to that as well. But you would know as well as we do what industries are having issues because of products that aren’t related to our products. Our objective is to make sure that when a customer needs something that we can supply that we can get that. We have been effective doing that. We can’t control the chip supply chain or how that might flow through. Josh Pokrzywinski: Got it. Appreciate it. Thanks guys. Dan Florness: Sure. Operator: Thank you. Our next question is coming from Kevin Marek of Deutsche Bank. Please go ahead. Kevin Marek: Hi. Good morning. Dan Florness: Good morning. Kevin Marek: I think I lot has been said already, but just going back to the point made about market share gains. I know you called out. I think it was like 26% of accounts that were first-time PPE buyers have reordered at this point. Is there anything you would add about gains made outside of PPE and maybe how share gains in core areas have shaped up over this pandemic period? Holden Lewis: Yeah. I mean, there’s -- unfortunately, there’s no industry resource that tallies up how all the distributors do and gives anything definitive on that. So, I think, that we had an interesting picture provided to us around safety and the pandemic and new customers and things like that. But new customer acquisition is not usually so dramatic as what you saw during that period of time. So I think it’s really difficult to say. What I would say is we continue to grow as a business. And I think if you look at industrial production and things of that nature, I don’t think that you are seeing that grow. There are some surveys that are done out there and certainly through February, those surveys were still pointing to distribution being negative. Industrial production was still slightly negative. We were growing. So, I think, those are the ways that I usually look at it to judge or understand the degree to which we are gaining market share. Historically, we have outgrown our industry. Historically, we have outgrown industrial production. I think that that continued through Q1. I think the numbers are out there for you to evaluate and I think we will continue to do that. Kevin Marek: Got it. No. That makes sense. Maybe just as a quick follow-up kind of following up on a prior question, I am wondering if you could talk about the trends through the quarter maybe by market, just thinking about manufacturing versus construction within March. It looks like results maybe, manufacturing seeing more acceleration versus construction or improvement, maybe just directly kind of comp related. Is there any color you can provide to delineate kind of trends between the two? Holden Lewis: Well, I don’t know, I mean, if you look at the construction business, and interestingly, this has been one that in recent months, the RVPs have been talking about it getting better and better, and the numbers really didn’t move and so it’s nice to see them begin to move. But I mean, if you look at construction, in January, construction was down 9% and February was down 14.5% and in March it was flat, and so that marks fairly significant improvement. Now, you are right, the comps got easier. But I mean, that’s true within manufacturing, which caused it to go from up 5% to up 1% to up 11%, right? So the comps are going to play a role. But the RVPs have been reporting for the last several months that the construction -- the tone of the construction market was getting better and there’s been a bit of a lag to that. But it feels to me like both of those end markets are improving versus where they have been. Kevin Marek: Got it. Thanks very much. Holden Lewis: Sure. Dan Florness: So it is five minutes to the hour and I guess we will wrap up to Q&A. And I just want to thank everybody for listening in today and thanks for your support and the Fastenal Blue Team. Take care all. Holden Lewis: Thanks. Operator: Ladies and gentlemen, thank you for your participation. This concludes today’s event. You may disconnect your lines or log off the webcast at this time and have a wonderful day.
Fastenal Company (NASDAQ:FAST) Quarterly Earnings Preview
- Fastenal is expected to report an EPS of $0.28, marking a 12% increase year-over-year.
- Projected quarterly revenue of approximately $2.07 billion, up from $1.92 billion the previous year.
- Strong financial health indicated by a current ratio of 4.28 and a debt-to-equity ratio of 0.13.
Fastenal Company, listed as NASDAQ:FAST, is a prominent player in the industrial and construction supplies sector. The company is known for its extensive range of products, including fasteners, safety equipment, and industrial supplies. Fastenal competes with other industry giants like Grainger and MSC Industrial Direct. The company is set to release its quarterly earnings on July 14, 2025.
Analysts expect Fastenal to report earnings per share (EPS) of $0.28, reflecting a 12% increase from the previous year. This growth is supported by a 7.6% rise in sales, driven by successful contract wins and the expansion of eBusiness. In May 2025, daily sales surged by 9.3%, with strong performance in manufacturing, safety products, and digital channels.
Fastenal's revenue for the quarter is projected to be approximately $2.07 billion, up from $1.92 billion a year ago. Despite inflationary pressures, the company is implementing cost controls and automation to reduce operating expenses by 60 basis points. This strategic approach aims to maintain profitability while navigating economic challenges.
The company's financial metrics provide insight into its market valuation. Fastenal has a price-to-earnings (P/E) ratio of 43.23, indicating the market's valuation of its earnings. The price-to-sales ratio stands at 6.54, reflecting the company's market value relative to its revenue. Additionally, the enterprise value to sales ratio is 6.58, showing the company's total valuation compared to its sales.
Fastenal's financial health is further highlighted by its strong current ratio of 4.28, indicating its ability to cover short-term liabilities with short-term assets. The company maintains a low debt-to-equity ratio of 0.13, suggesting a conservative approach to leveraging debt. These metrics underscore Fastenal's solid financial position as it prepares to release its quarterly earnings.
Fastenal Company (NASDAQ:FAST) Stock Analysis: A Closer Look at Its Market Position and Future Prospects
- Analysts maintain an "Equal-Weight" rating for Fastenal Company (NASDAQ:FAST), indicating a stable investment outlook.
- Projected earnings growth with an expected increase in quarterly revenue, highlighting the company's positive growth trajectory.
- Stock volatility and investor interest remain high, with market capitalization and trading volume indicating strong investor confidence.
Fastenal Company (NASDAQ:FAST) is a prominent player in the industrial and construction supplies sector. Known for its extensive range of products, Fastenal serves a diverse clientele, including manufacturers, contractors, and government entities. The company competes with other industry giants like Grainger and MSC Industrial Direct. Fastenal's stock, currently priced at $43.13, has been a focal point for investors and analysts alike.
On July 3, 2025, Stephens maintained its "Equal-Weight" rating for Fastenal, advising investors to hold the stock. This recommendation comes as Fastenal prepares to release its second-quarter earnings on July 14. Analysts expect earnings of 28 cents per share, up from 25 cents in the same period last year, indicating positive growth.
Fastenal's projected quarterly revenue stands at $2.07 billion, an increase from $1.92 billion a year ago. This growth is noteworthy, especially after the company's two-for-one stock split announced on April 23. Despite a recent 0.4% decline in share price, closing at $42.68, the stock has shown resilience with a 1.05% increase, reaching a high of $43.50 today.
Morgan Stanley analyst Chris Snyder, known for his accuracy, also maintained an "Equal-Weight" rating for Fastenal. On May 23, 2025, he adjusted the price target from $38 to $40, reflecting confidence in the company's performance. Fastenal's market capitalization is approximately $49.48 billion, with a trading volume of 2,955,923 shares, indicating strong investor interest.
The stock's fluctuation between $42.63 and $43.50 today, with a 52-week high of $43.50 and a low of $31.02, highlights its volatility. Investors are keenly watching Fastenal's upcoming earnings report, as it could influence future stock performance and analyst ratings.
Fastenal Company (NASDAQ:FAST) Earnings and Stock Analysis
Fastenal Company (NASDAQ:FAST) is a leading entity in the industrial and construction supplies sector, renowned for its comprehensive product lineup, including fasteners, tools, and safety equipment. Competing against industry stalwarts like Grainger and MSC Industrial Direct, Fastenal is on the verge of unveiling its second-quarter earnings on July 14, 2025.
On July 3, 2025, David Manthey from Robert W. Baird established a price target of $86 for FAST, which was trading at $43.13 at that moment. This projection indicates a potential price surge of approximately 99.4%. The forthcoming earnings report from Fastenal is anticipated to reveal earnings of 28 cents per share, an improvement from 25 cents per share in the corresponding period the previous year, signifying positive growth.
Fastenal's expected quarterly revenue is projected to hit $2.07 billion, a rise from $1.92 billion a year earlier. This revenue growth is in harmony with the optimistic price target set by David Manthey. Despite a minor decline of 0.4%, closing at $42.68, the stock has demonstrated resilience with a 1.05% increment, reaching $43.13.
Earlier in the year, Fastenal announced a two-for-one stock split on April 23, aimed at making the stock more accessible to a broader range of investors. Morgan Stanley analyst Chris Snyder maintained an Equal-Weight rating for Fastenal and raised the price target from $38 to $40 on May 23, 2025, reflecting a cautiously optimistic stance.
With a market capitalization of approximately $49.48 billion and a trading volume of 2,955,923 shares, Fastenal's stock has oscillated between a low of $42.625 and a high of $43.5 today, marking its peak price over the past year. The lowest price for the stock in the past year was $31.015, showcasing its upward trajectory.
Fastenal Company Executes 1-for-2 Stock Split Amidst AI Market Excitement
- Fastenal Company (NASDAQ:FAST) executed a 1-for-2 stock split, reflecting a broader trend of stock splits driving market indices to record highs.
- The stock split resulted in a significant decrease in share price by 50.12%, with current trading at $40.63.
- Despite the split, Fastenal's market capitalization remains robust at approximately $46.61 billion, highlighting investor interest amidst AI market excitement.
Fastenal Company, trading under the symbol NASDAQ:FAST, executed a 1-for-2 stock split on May 22, 2025. This strategic move is part of a broader trend on Wall Street, where stock splits have been instrumental in driving market indices to record highs. Since its IPO, Fastenal's shares have surged by an impressive 214,200%, showcasing its remarkable growth trajectory.
Despite the stock split, FAST's current share price is $40.63, reflecting a significant decrease of 50.12%, or $40.83. The stock has fluctuated between $40.14 and $40.94 during the day, with a 52-week range of $30.68 to $42.44. This volatility is not uncommon following a stock split, as investors adjust to the new share price.
Fastenal's market capitalization is approximately $46.61 billion, with a trading volume of 1,783,402 shares. While stock splits do not impact a company's market capitalization or operational performance, they are a strategic tool to adjust share price and outstanding share count, making shares more accessible to a broader range of investors.
The excitement around stock splits is further fueled by the ongoing interest in artificial intelligence (AI). According to PwC, AI could contribute $15.7 trillion to the global economy by 2030, presenting a significant opportunity for investors. This fascination with AI complements the strategic moves like stock splits, as companies position themselves for future growth.
Fastenal Company's Financial Performance and Market Position
- Stable EPS: Fastenal reported an EPS of $0.52, demonstrating consistent profitability.
- Revenue Growth: The company's revenue increased by 3.4% to $1.96 billion, surpassing market expectations.
- Strong Financial Ratios: Fastenal's P/E ratio, debt-to-equity ratio, and liquidity ratios indicate a solid financial health and market valuation.
Fastenal Company, listed on NASDAQ:FAST, is a key player in the wholesale distribution of industrial and construction supplies. The company is known for its extensive range of products and services, catering to various industries. Fastenal competes with other major distributors in the sector, maintaining a strong market presence through its strategic operations and financial performance.
On April 11, 2025, Fastenal reported its earnings, revealing an EPS of $0.52, which matched the estimated EPS. This consistency in earnings per share, as highlighted by Zacks, reflects the company's stable financial performance. The EPS remained unchanged from the previous year, indicating steady profitability despite market fluctuations.
Fastenal's revenue for the quarter ending March 2025 was approximately $1.96 billion, marking a 3.4% increase from the same period last year. This revenue slightly exceeded the Zacks Consensus Estimate of $1.95 billion, resulting in a positive surprise of 0.63%. Such revenue growth is crucial for investors as it demonstrates the company's ability to surpass market expectations.
The company's financial ratios provide further insights into its performance. Fastenal's P/E ratio is around 39.97, indicating how much investors are willing to pay for each dollar of earnings. The price-to-sales ratio of about 6.10 and enterprise value to sales ratio of roughly 6.13 suggest a strong valuation in the market. These metrics are essential for evaluating the company's financial health and market position.
Fastenal's debt-to-equity ratio of approximately 0.13 indicates a low level of debt compared to its equity, reflecting financial stability. The current ratio of about 4.67 suggests strong liquidity, meaning the company can easily cover its short-term liabilities. These financial metrics are vital for assessing Fastenal's ability to sustain its operations and growth in the competitive industrial supply sector.
Fastenal Company's Financial Performance and Market Position
- Stable EPS: Fastenal reported an EPS of $0.52, demonstrating consistent profitability.
- Revenue Growth: The company's revenue increased by 3.4% to $1.96 billion, surpassing market expectations.
- Strong Financial Ratios: Fastenal's P/E ratio, debt-to-equity ratio, and liquidity ratios indicate a solid financial health and market valuation.
Fastenal Company, listed on NASDAQ:FAST, is a key player in the wholesale distribution of industrial and construction supplies. The company is known for its extensive range of products and services, catering to various industries. Fastenal competes with other major distributors in the sector, maintaining a strong market presence through its strategic operations and financial performance.
On April 11, 2025, Fastenal reported its earnings, revealing an EPS of $0.52, which matched the estimated EPS. This consistency in earnings per share, as highlighted by Zacks, reflects the company's stable financial performance. The EPS remained unchanged from the previous year, indicating steady profitability despite market fluctuations.
Fastenal's revenue for the quarter ending March 2025 was approximately $1.96 billion, marking a 3.4% increase from the same period last year. This revenue slightly exceeded the Zacks Consensus Estimate of $1.95 billion, resulting in a positive surprise of 0.63%. Such revenue growth is crucial for investors as it demonstrates the company's ability to surpass market expectations.
The company's financial ratios provide further insights into its performance. Fastenal's P/E ratio is around 39.97, indicating how much investors are willing to pay for each dollar of earnings. The price-to-sales ratio of about 6.10 and enterprise value to sales ratio of roughly 6.13 suggest a strong valuation in the market. These metrics are essential for evaluating the company's financial health and market position.
Fastenal's debt-to-equity ratio of approximately 0.13 indicates a low level of debt compared to its equity, reflecting financial stability. The current ratio of about 4.67 suggests strong liquidity, meaning the company can easily cover its short-term liabilities. These financial metrics are vital for assessing Fastenal's ability to sustain its operations and growth in the competitive industrial supply sector.
Fastenal Company (NASDAQ: FAST) Earnings Preview and Financial Health Analysis
Fastenal Company (NASDAQ: FAST) is a leading distributor of industrial and construction supplies, known for its extensive product range, including fasteners, tools, and safety equipment. Fastenal operates through a network of branches and onsite locations, serving a diverse customer base. The company faces competition from other industrial supply firms like Grainger and MSC Industrial Direct.
Fastenal is set to release its quarterly earnings on April 11, 2025, with analysts estimating an EPS of $0.52. The company's revenue for the quarter is projected to be around $1.95 billion. This earnings report will be released before the market opens, providing investors with early insights into the company's financial performance.
Analysts have adjusted their price expectations for Fastenal in anticipation of the earnings release. The company is expected to show growth in manufacturing, albeit at a slower pace. Fastenal's robust digital strategy and balanced mix of onsite and offsite operations are key factors in its performance. However, softness in industrial markets could impact overall results.
Fastenal's financial health is supported by a low debt-to-equity ratio of 0.13, indicating minimal reliance on debt. The company's strong current ratio of 4.67 suggests it can easily cover short-term liabilities with its assets. These metrics highlight Fastenal's operational efficiency and financial stability as it prepares to announce its first-quarter earnings.
