Earnings results from industrial distributor
Fastenal
show things in this economy are challenging, but getting a little better.
The company is one of the earlier-reporting companies each quarter, making its results a bellwether for investors. Fastenal (ticker: FAST) also offers investors an important look at how the U.S. economy is doing. Operating out of almost 3,400 locations across the nation, it sells thousands of items to tens of thousands of industrial customers.
Thursday morning, Fastenal announced third-quarter earnings per share of 52 cents from sales of $1.85 billion. Wall Street was looking for earnings per share of 50 cents from sales of $1.85 billion. A quarter ago, Fastenal reported 52 cents a share on $1.88 billion. A year ago, in the third quarter of 2022, Fasental earned 50 cents a share from sales of $1.80 billion.
Operating profit margins came in at 21%, about 0.3 percentage point better than Wall Street was modeling.
The results look OK, and investors are relieved. Fastenal shares were up 7.8%, at $60.37, in midday trading Thursday. The
S&P 500
was up 0.2%. The
Dow Jones Industrial Average
was flat.
Edward Jones analyst Jeff Windau called the quarter solid with continuing themes of overall slow growth. “They posted a beat and a typical solid quarter…. All that flows through to a little bit of relief [for the stock,” Windau tells Barron’s.
Still, per-share earnings were flat year over year, so if things look stuck, it’s because they are. The Institute for Supply Management Purchasing Managers Index tracks the U.S. industrial economy. The index has come in below 50 for 11 consecutive months. A level above 50 indicates the industrial economy is growing, and below 50 indicates contraction.
Historically speaking, things should be about to get better. Baird analyst Dave Manthey wrote in late September that since 1990, industrial downturns like this one last an average of 12.2 months.
There are signs of improvement in the numbers. Sales to the manufacturing sector picked up in September, rising 6.6% year over year. Construction sales stopped declining at a faster rate. Sales into that sector fell 9.5% year over year in July and then fell 6.2% in both August and September. A weak housing market is a big reason construction-related sales are lower.
At least things are getting less bad there.
Coming into Thursday trading, Fastenal stock is up about 23% over the past 12 months, less than one percentage point better than the S&P 500. The Dow is up about 16% over the past 12 months.
Fastenal stock trades for about 26 times estimated 2024 earnings. That multiple is right in the middle of its price/earnings range for the past five years.
Write to Al Root at [email protected]
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