Fastenal Profits Up in 2013, Shares Down

Andrew Klips  |

Fastenal Co. (FAST) on Wednesday reported improving profits in the second quarter that were in line with consensus expectations, although revenue was light as growth was slowed in part because of what the company called "economic uncertainty" globally and "economic policy uncertainty" in the U.S and poor weather conditions.

For the quarter ended June 30, Winona, Minnesota-based Fastenal recorded net sales of $847.6 million, up 5.3 percent from $804.9 million in the same quarter last year. Net earnings increased 7.7 percent to $121.0 million, or 41 cents per share, from $112.3 million, or 38 cents per share in the year prior quarter.

Wall Street was expecting profits of 41 cents per share on sales of $857 million from the seller of tools, fasteners, construction and industrial supplies.

Gross profit improved to 52.2 percent in the recent quarter from 51.6 percent in the comparable quarter last year. For the first six months of 2013, gross profit was 52.3 percent, compared to 51.4 percent last year. Normal gross profit for the industry is 51 percent to 53 percent, according to Fastenal.

Operating and administrative expenses rose 6 percent to $250.8 million in the second quarter from 236.5 million in last year's quarter.

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The company said that its FAST Solutions (industrial vending) operations continue to expand rapidly, although not on pace with its "aggressive" 2013 goal of signing 2,500 machines per month. Through the first six months of the year, 11,000 machines have been signed. Regarding publicly stating that it wanted to hit 30,000 machines this year, Fastenal said, "in hindsight, we should keep very aggressive goals to ourselves."

With 33 new stores opened so far this year, Fastenal operates 2.677 stores as of June 30.

More unit sales, mostly at older stores, lifted revenue in the January through June period. For the first half of 2013, net sales climbed to $1.65 billion from $1.58 billion in the first six months of 2012. Profits increased to $230.1 million, or 78 cents per share, compared to $212.5 million, or 72 cents per share, in the same time frame last year.

No stock was repurchased in the first half of the year. The current share buy-back plan still has 1.8 million shares authorized. On Tuesday, the company announced a dividend of 25 cents per share to shareholders of record on July 26 that will be paid on August 23.

Shares of FAST are trading down 3 percent at $45.74 in early Wednesday action with the sales miss. From a wide view, the stock has held a strong uptrend for more than a decade, but has established a tough resistance point at $53 that has acted like kryptonite for more than one year, keeping the uptrend from extending.

The downward move so far today has pushed shares slightly into negative territory for 2013.

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