Fastenal Company (NASDAQ: FAST) has reported the adjusted earnings per share of 46 cents in the first quarter of FY 17, while reported the adjusted revenue growth of 6.1 percent to $1.05 billion in the first quarter of FY 17. The increase in net sales was due to the higher unit sales. The higher unit sales have resulted primarily from increases in sales at existing store locations, growth in the industrial vending business, and growth in new and existing Onsite locations (defined as dedicated sales and service provided from within the customer’s facility). The sales of fastener products, which represented 35.6% of net sales in the first quarter of 2017, grew 0.8% and the sales of non-fastener products, which represented 64.4% of net sales in the first quarter of 2017, grew 9.4%. Moreover, the operating income, as a percentage of net sales, has declined to 20.3% in the first quarter of 2017 from 20.4% in the first quarter of 2016 due to the 40 basis point decline in gross profit margin. As a result, the stock lost over 5.4% this morning (As of 10:47AM EDT on April 12th, 2017; Source: Google finance).
However, there is improvement in the operating and administrative expenses (including a gain on the sale of property and equipment), as a percentage of net sales, due to the relatively modest growth in employee-related expenses, which were partially offset by sharper growth in the selling transportation expenses, largely due to an increase in the average cost of fuel and consumption during the period.
Additionally, FAST has signed 5,437 industrial vending machines during the first quarter of 2017, an increase of 17.0% over the first quarter of 2016. Further, FAST has signed 64 new Onsite locations during the first quarter of 2017 compared to 48 signings in the first quarter of 2016, which is an increase of 33.3%.
Meanwhile, on March 31st, 2017, FAST has acquired certain assets and assumed certain liabilities of Manufacturers Supply Company (Mansco). The company had funded the cash purchase price for the Mansco acquisition with the proceeds from a new series of senior unsecured promissory notes under the master note agreement.
FAST stock has risen 21.9% in the last six months (source: Google Finance). However, investors might need to watch before investing in the stock as 4 analysts has covered the stock while recommending a “Moderate Sell”. FAST has an average price target of $46, which is a further downside of 8.62%.