What's In The Cards For Fastenal In Q4 Earnings?

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Fastenal Company (FAST - Free Report) is scheduled to report fourth-quarter 2022 results on Jan 19, before the opening bell.

In the last reported quarter, earnings and net sales topped the Zacks Consensus Estimate. Earnings and net sales increased 17.4% and 16% from the year-ago figures, respectively. Fastenal’s earnings topped the consensus mark in all the last four quarters, with the average being 4.8%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has remained unchanged at 42 cents over the past 60 days. The estimated figure indicates 5% growth from the year-ago level. The consensus mark for revenues is pegged at $1.67 billion, suggesting a 9.3% increase from the year-ago reported figure of $1.53 billion.

Fastenal Company Price and EPS Surprise

Fastenal Company Price and EPS Surprise

Fastenal Company price-eps-surprise | Fastenal Company Quote

Key Factors to Note

Sales: Higher manufacturing and non-residential construction demand are expected to have generated higher sales on a year-over-year basis (although at a moderate level) for this national wholesale distributor of industrial and construction supplies. Notably, slower international business due to the zero-COVID policy in China and a soft European macro is expected to have weighed on the company’s top line.

If we go by the latest monthly sales report, November’s average daily sales grew 10.2% to $27.5 million, moderating sequentially. In October 2022, daily sales registered 13.6% growth, whereas the same had witnessed 13.7% growth in September 2022.

The company has been navigating well through issues like price inflation, supply-chain challenges and a shortage of labor. It has been gaining from all product categories, end markets and customers.

In terms of end markets/products/customers in November and October 2022, manufacturing sales improved by 15.3% and 19% from the respective year-ago months. Non-residential construction declined 0.9% in November but grew 1.2% in October 2022.

Fastener sales were up 8.7% in November (compared with a 12.2% increase in October 2022). Safety sales increased 9.6% in November compared with 14.7% growth in October 2022. In terms of customer channel, national accounts were up 14% year over year in November (compared with a 19% increase in October 2022), while non-national accounts grew 6% (compared with a 7% rise in October 2022).

The Zacks Consensus Estimate for the company’s overall daily sales is pegged at $26.9 million, which indicates an increase from $24.7 million reported a year ago but a decrease from $28.2 million in the prior quarter.

Margins: Inflationary pressure has been a cause of concern. The company highlighted that it has been experiencing significant material cost inflation, particularly for steel, fuel and transportation. The company has been experiencing the adverse effects of tightening global and domestic supply chains. Also, November’s Hurricane Nicole, negative product/customer mix, lower organizational leverage and adverse price/cost dynamics are expected to have weighed on the company’s quarterly margins.

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