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Manufacturing activity in New York grew at a slower pace this month, with a closely watched index from the Federal Reserve Bank of New York falling to 7.6 from 20.6 in August. While any number above zero still means the sector is growing, the sharp drop suggests the recent surge in factory work is cooling off.
This matters for Fastenal because it makes its money by managing supply chains for factories and construction sites. When manufacturing activity slows down, these customers buy fewer parts and supplies, which can directly impact Fastenal's sales growth. Since the company aims to grow faster than the broader industrial market, a cooling manufacturing sector makes that goal harder to reach.
Source: WSJ
Fastenal reported quarterly revenue of 2.39 billion dollars, slightly ahead of what analysts expected. The company is successfully winning more business from large customers and expanding its digital footprint. Daily sales rose about 15 percent, a sign that its model of placing vending machines and supply staff directly inside customer factories is gaining ground.
Operating margins held steady at 21 percent. This is a win for the company because it managed to offset higher product costs by being more efficient with its own spending. For a long-term owner, the fact that Fastenal can grow quickly with large accounts without letting its profit per sale drop is the most important takeaway.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The firm set a price target of 55 dollars, which is higher than the average analyst target of 48 dollars. This new coverage suggests some analysts see the company's shift toward high-tech inventory management as a reason for the stock to be worth more than it has been in the past.
Source: Redburn Partners
The board approved a dividend of 26 cents, continuing a long history of returning cash to shareholders that dates back to 1991. The company also noted it is still buying back its own shares, which is a way to return extra cash to owners by reducing the total number of shares in the market.
Source: Business Wire
Management has a clear habit of setting a bar they can clear, delivering five straight quarters of narrow wins that show they have a firm grip on their costs.
| Expectation | |
|---|---|
| EPS | $0.34 |
| Revenue | $2.44B |