Fastenal shares hit all-time high following earnings
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Fastenal, a leading distributor of fasteners and industrial and construction-related supplies, has announced its Q4 2023 earnings report. Fastenal's products are divided into three categories: fasteners, safety supplies, and other products, including tools, janitorial supplies, and cutting tools. Fastenal serves various end markets, including manufacturing, non-residential construction, reseller, government/education, and transportation/warehousing.
The company reported earnings of $0.46 per share, slightly outpacing Street expectations. Revenues increased by 3.7% year-over-year to $1.76 billion, edging out consensus estimates. Fastenal's stock price jumped 7% in reaction, hitting an all-time high of $68.68 in early trade. and reached an all-time high.
Revenue growth was primarily driven by the expansion of Onsite locations opened in 2023 and 2022, as well as strong sales to large customers. Foreign exchange positively impacted the sales by approximately 10 basis points in Q4 2023, in contrast to a negative impact of 90 basis points in Q4 2022.
Product pricing had a positive impact on net sales in Q4 2023, consistent with historical trends. Product pricing had a more significant impact of 350 to 380 basis points on net sales in Q4 2022. Fastenal's pricing actions over the past year were relatively modest, resulting in stable price levels throughout Q4 2023.
In Q4 2023, Fastenal observed a divergence in performance between manufacturing and non-manufacturing end markets. The company experienced accelerated growth with key account customers in the manufacturing sector, driven by its impactful service model and technology. Additionally, the other end markets benefited from increased sales to support retailer-oriented customers during the holiday season, primarily due to the purchase of safety products by customers with extensive distribution centers.
Fastenal's gross profit margin improved from 45.3% in Q4 2022 to 45.5% in Q4 2023. This improvement can be attributed to higher product margins in fasteners and safety products. The company also experienced slightly positive price-cost dynamics, reflecting moderating product costs, the absence of significant pricing actions, and favorable comparisons. However, this was partially offset by the negative effect of customer and product mix, as growth was driven by Onsite customers and non-fastener products, which typically have lower gross profit margins.
Net earnings for Fastenal in Q4 2023 reached $266.4 million, representing an 8.5% increase compared to Q4 2022. Diluted net earnings per share also rose from $0.43 in Q4 2022 to $0.46 in Q4 2023.
Fastenal's shares reached all-time highs today following the strong earnings report, with a 7% increase. The stock had experienced a downturn at the beginning of the year as investors banked profits from the end-of-year rally. Concerns over industrial and construction activity in 2024 weighed on sentiment as the stock slipped from $66 to $62. FAST would hold that level, which corresponded with its 50-sma and rallied back into its 20-sma ($63.66) ahead of the report. Investors flocked back into the name, but we have seen FAST peel back approx. 5% in intraday trade. Holding the "gap up low" of $65.50 will be critical.
Overall, Fastenal's Q4 2023 earnings report showcases positive performance, with earnings and revenues surpassing expectations. The company's growth can be attributed to the expansion of Onsite locations, strong sales to large customers, improved product margins, and favorable performance in certain end markets. Despite some concerns earlier in the year regarding industrial and construction activity, Fastenal's shares have reached all-time highs, indicating investor confidence in the company's performance.