A month has passed since the last Fastenal (FAST) results report. Stocks lost about 8.7% during this period, underperforming the S&P 500.
Will the recent negative trend continue until its next earnings release, or should Fastenal experience a breakout? Before we dive into the reaction of investors and analysts lately, let’s take a look at the latest earnings report to better understand the important factors.
Fastenal’s fourth quarter earnings and revenue beat
Fastenal Company ended 2021 on a strong note. The company’s earnings and revenue not only beat Zacks’ consensus estimate, but also improved year-over-year, given strong demand for manufacturing equipment and supplies and construction as well as higher prices.
Profits and retail sales
The company reported earnings of 40 cents per share, which beat the consensus mark of 37 cents by 8.1% and rose 17.6% from the year-ago period.
Net sales totaled $1,531.8 million, surpassing the consensus mark of $1,507 million by 1.6% and increasing 12.8% from the previous year‘s figure of $1,358 million .
It recorded daily sales of $24.7 million, reflecting a 14.6% year-over-year increase. On a monthly basis, daily sales improved 16.5%, 13.2% and 14.1% in December, November and October, respectively, year over year.
Daily sales of fastener products (primarily used for industrial production and representing approximately 33.5% of fourth-quarter sales) increased 24.2% year-on-year, supported by higher demand in the manufacturing and construction sector as well as an increase in prices. Sales of security products (representing 21.4% of fourth quarter sales) rose 3.5% daily. The increase was mainly driven by solid growth and higher prices for traditional manufacturing and construction customers. Sales of other products (representing 45.1% of fourth quarter sales) increased 12.8% year-on-year.
Sales trends and other growth drivers
Fastenal signed 274 new onsite locations in 2021. As of December 31, 2021, the company had 1,416 active locations, up 11.9% from the prior year period. Daily sales via Onsite sites (excluding sales transferred from branches to new Onsite) increased by more than 20% compared to a year ago.
The company continues to expect 375-400 annual onsite signatures in 2022.
Daily sales through FMI-weighted devices increased 47.7% in the fourth quarter and accounted for 35.1% of net sales.
Daily sales to National Account customers (representing 57.8% of total quarterly revenue) increased 19.9% year-over-year for the fourth quarter of 2021. Daily sales to National Account customers non-domestic (which include government customers and account for 42.2% of total quarterly revenue) increased 7.6% from the prior year quarter.
Gross margin of 46.5% for the quarter improved 90 basis points or basis points from the prior year period. The improvement was driven by higher revenue margin related to security products and leveraged overhead/organizational cost absorption.
In addition, the operating margin improved by 10 basis points to 19.6% compared to the 19.5% figure of the previous year.
Net sales were $6,010.9 million, up 6.4% from the 2020 level. Earnings of $1.60 per share were up 7.4% from 2020. Gross margin of 46.2% increased 70 basis points year over year.
Cash and cash equivalents were $236.2 million as of December 31, 2021, down slightly from $245.7 million as of December 31, 2020. Long-term debt at the end of the quarter was of $330 million, down from $365 million at the end of 2020.
For 2021, cash flow from operating activities totaled $770.1 million, compared to $1,101.8 million in the same period last year.
How have the estimates changed since then?
It turns out that the revision of the estimates has tended to increase over the past month.
Currently, Fastenal has an average growth score of C, but its Momentum score is doing a bit better with a B. However, the stock has been assigned a D rating on the value side, which places it in the bottom 40% for this investment strategy.
Overall, the title has an overall VGM score of D. If you’re not focused on a strategy, this score is the one you should be interested in.
Estimates have been trending higher for the stock overall, and the magnitude of these revisions looks promising. It comes with a little surprise. Fastenal has a Zacks Rank #2 (Buy). We expect above-average performance for the stock over the next few months.
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