Earnings Preview: Fastenal - Analyst Blog
April 11 2011 - 10:23AM
Zacks
Fastenal Co. (FAST) announced that it would
release its results for the first quarter of fiscal 2011 before the
market opens on April 12, 2011. Winona-based Fastenal earned a
profit of 44 cents in the fourth quarter, marginally behind the
Zacks Consensus Estimate of 45 cents.
In the upcoming quarter, the Zacks Consensus Estimate for
Fastenal is pegged at a profit of 51 cents per share, reflecting an
annualized growth of 35%. The upside potential of the estimate,
essentially a proxy for future earnings surprises, is just 2%.
With respect to earnings surprises, the company outdid the Zacks
Consensus Estimate in the trailing four quarters. This is reflected
in the average earnings surprise of 5.4%, with a negative surprise
only in the last quarter.
Fourth Quarter Review
Fastenal recorded a profit of $65.1 million during the fourth
quarter of 2010, up 46.3% from $44.5 million in the year-ago
quarter. Consequently, earnings per share improved 46.7% to 44
cents from 30 cents a year ago, a penny behind the Zacks Consensus
Estimate of 45 cents per share.
Net sales for the quarter increased 20.3% year over year to
$573.8 million, driven by improvement in sales to both
manufacturing customers as well as non-residential construction
customers of the company. Daily sales to the manufacturing
customers surged 17.7% in the quarter and those to the
non-residential construction customers rose 10.3%.
During the quarter, Fastenal opened 37 stores, leading to a
total of 2,490 stores as of December 31, 2010. The company has
indicated its plan to open 150 to 200 new stores during 2011, which
is equivalent to an annualized growth rate of 6.0% to 8.0%.
Fastenal’s average store sales were $67,600 per month versus
$58,100 per month in the fourth quarter of 2009. The company aims
to push average store sales to $125,000 per month.
Gross profit rose 25.6% to $298.6 million in the quarter from
$237.7 million in the year-ago quarter. Consequently, gross margin
increased to 52.0% from 49.9% in the corresponding period of
2009.
Estimate Revisions Trend
The first quarter 2011 estimate remained unchanged at 51 cents.
This implies the analysts’ cautiousness regarding the stock. A slow
recovery of the macro economic factors has marred the near-term
visibility of the analysts.
Agreement of Estimate Revisions
Only 1 out of the 10 analysts covering the stock for the first
quarter of fiscal 2011 has made an upward revision in the last 7
days. However, no downward revision has been made in the past 30
days. A weak construction industry with a very slow recovery has
forced the analysts to remain cautious on the stock.
Magnitude of Estimate Revisions
The first quarter 2011 estimate remained unchanged at 51 cents
in the last 7 days, last 30 days as well as in the last 60 days.
The Zacks Consensus Estimate for the first quarter is 70% higher
than the year-ago profit of 30 cents.
Our Take
Fastenal has a widespread customer base in varied markets. This
indicates strong market penetration by the company. Besides,
Fastenal has undertaken enough initiatives to ensure customer
satisfaction and long-term business growth. It has employed a hub
and spoke model, along with opening new stores and service
centers.
The hub and spoke centres are so located as to meet any type of
consumer demand.
However, the macro-economic factors are unfavorable for the
sustainable growth of the company. The construction industry is
weak. Diesel fuel and gasoline prices are highly unstable. Thus
keeping all these in mind, we give Fastenal shares a Neutral
recommendation in the long term.
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