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Fastenal's (FAST) 9.5% Sales Growth in May Fall From April

Fastenal Company FAST came out with May 2019 sales report, wherein net sales grew 9.5% year over year to $472.3 million. However, the figure was down from 12.5% net sales growth in April.

Daily sales grew 9.5% to $21.5 million, up from 7.4% growth registered in April. Foreign exchange impacted May sales by 40 basis points. Daily sales growth rate in May marks the second month of high single-digit growth of the company. Although this uptick represents solid performance, growth at this level ahead will mark a deviation from management’s expectations of double-digit growth in 2019, attributable to a combination of company-specific drivers (i.e. Onsite, vending) and price realization.

Nonetheless, performance rebounded slightly in May from the slower results reported in April across all markets and product lines served by Fastenal.

From end-market perspective, manufacturing sales grew 11.5% during the month, slightly lower than 11.9% growth in the corresponding year-ago period. Again, non-residential construction grew 9.9%, lower than 15.9% growth reported in May 2018.

Fastenal derives sales from the fastener product line and other product line. Fasteners growth improved to 8.1% from 5.1% in April but slowed from 9.1% in May 2018. Non-fasteners grew 10.8%, maintaining its trend of recording a double-digit growth rate. It slowed down from 15% in May 2018 but improved from 8.8% in April 2019.

National account growth was an impressive 15%, given the fact that 76% of the top 100 accounts are expanding. Non-national accounts grew 2%, up from 1% growth in April but down from 7% a year ago.

Higher market demand, growth in the industrial vending business and existing Onsite locations have been driving its performance over the last few quarters. Sales through vending devices continued to grow at a double-digit pace over the last few quarters, primarily due to higher installed base.

However, product and freight inflation, unfavorable product mix, pricing and competitive pressures have been hurting its gross margins.

Nonetheless, Fastenal, a Zacks Rank #3 (Hold) stock, remains optimistic about its performance in the forthcoming quarters, given improved pricing expectation. Since the beginning of 2019, shares of Fastenal have gained 22.2%, outperforming its industry’s 11.3% growth.


Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector include BMC Stock Holdings, Inc.BMCH, Builders FirstSource, Inc. BLDR and Target Corporation TGT. While BMC sports a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BMC’s earnings surpassed estimates in all the trailing four quarters, with the average being 39.4%.

Builders FirstSource’s earnings surpassed estimates in all the trailing four quarters, with the average being 17.9%.

Target has an expected earnings growth rate of 9.8% for the current year.

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