Fastenal Company (NASDAQ:FAST) is gearing up to unveil its first-quarter 2024 results on April 11, before the opening bell.
In the previous quarter, both earnings and net sales surpassed the Zacks Consensus Estimate by 2.2% and 0.6%, respectively. Earnings and net sales witnessed an 8.4% and 3.7% increase from the figures of the previous year, respectively.
Fastenal has managed to beat the consensus earnings estimate in three out of the last four quarters, meeting it on one occasion, with an average beat of 2.6%.
Estimate Revision Trends
For the upcoming quarter, the Zacks Consensus Estimate for earnings per share has remained steady at 53 cents over the past 60 days, indicating a 1.9% growth from the year-ago level. The consensus estimate for revenues stands at $1.92 billion, suggesting a 3.1% increase from the year-ago reported figure of $1.86 billion.
Sales Outlook
While the broader manufacturing sector’s demand outlook remains sluggish, Fastenal has several factors working in its favor, expected to drive growth. These factors include a significant number of large customers, a robust digital strategy, a balanced mix of onsite and offsite services, and market share gains across various product categories. Despite facing challenging comparisons to the previous year, Fastenal’s positive attributes are anticipated to fuel its growth.
According to the latest monthly sales report, February’s average daily sales (ADS) grew by 2.6% to $29.1 million, an improvement from the 1.6% growth observed in January 2024. February’s ADS might have been boosted by a sequential rebound from poor weather conditions in January, which negatively impacted January’s ADS by an estimated 120-150 basis points (bps) year over year.
In February and January 2024, total manufacturing sales improved by 6.7% (Heavy Manufacturing and Other Manufacturing) and 4%, respectively, from the year-ago months. Non-residential construction declined by 3.4% in February and 8.6% in January 2024. Fastener sales decreased by 3.5% in February and 6% in January 2024. Conversely, Safety sales increased by 8.3% in February compared to 9.7% growth in January 2024. Other categories improved by 4.8% in February and 3.3% in January 2024.
Regarding customer channels, national accounts were up by 7% year over year in February and 6% in January 2024, while non-national accounts declined by 3% in February and 6% in January 2024.
Based on our model, Fastenal’s overall daily sales for the first quarter are expected to be $29.8 million, indicating a 2.7% increase from the $29 million reported a year ago.
Margins Expectation
Despite the decline in steel and freight expenses, Fastenal is striving to maintain a balance between pricing and decreasing costs to mitigate any adverse impact on full-year margins.
Challenges such as negative impact from customer and product mix, high growth in the lower margin of Onsite and non-fastener products, and lower product margins in certain other categories are expected to have been headwinds. Additionally, increased overhead costs may have weighed on the company’s margins.
Per our model, the gross margin for the quarter is anticipated to be 46.2%, up 50 bps from the year-ago figure. Total operating expenses are expected to increase by 3.7% to $473.7 million in the first quarter from a year ago.
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