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Category: Stock Market and Fastenal
Date: 8 October 2019 Stock Price: $31.03 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Fastenal, a distributor of a wide variety of construction products with over 2 200 branches.
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About Fastenal
Fastenal Company is an American company based in Winona, Minnesota. Distributing goods used by other businesses, it has over 2,200 branches throughout the US, Canada, Mexico and Europe along with 13 distribution centers
Fastenal is different things to different customers: a local relationship, a logistics company, a consultant, a technology solutions provider, and more generally, a distributor of wide-ranging industrial and construction products. These aspects of our service share a common foundation: great people, close to our customers, backed by world-class resources. As our capabilities continue to expand and evolve, this is what sets us apart in terms of service, growth, and value.
‘Great people’ speaks to our organizational commitment to bring out and fully utilize the creativity of every team member. We pursue this by prioritizing employee training, by rewarding success and promoting from within, and by maintaining a decentralized culture where ideas and innovation flow in all directions, not just from the top down.
‘Close to our customers’ refers to our local distribution infrastructure – the hubs, trucks, in-market servicing locations, and point-of-use solutions that shorten and simplify the supply chain. It also refers to something less tangible (but closely related) – the customer relationships, collaboration, and strategic alignment afforded by our local presence.
‘World-class resources’ describes the ever-expanding suite of products, services, solutions, and specialists we draw upon to meet each customer’s unique business needs. With offerings that range from custom manufacturing, to subject matter experts in areas like safety and engineering, to e-business and automated supply solutions, we provide value far beyond selling and shipping products. In an industry that’s becoming increasingly centralized, standardized, and transactional, we’re growing faster – and more profitably – by continuing to invest in the fundamentals of effective service: great people, close to our customers, backed by world-class resources.
Fastenal is different things to different customers: a local relationship, a logistics company, a consultant, a technology solutions provider, and more generally, a distributor of wide-ranging industrial and construction products. These aspects of our service share a common foundation: great people, close to our customers, backed by world-class resources. As our capabilities continue to expand and evolve, this is what sets us apart in terms of service, growth, and value.
‘Great people’ speaks to our organizational commitment to bring out and fully utilize the creativity of every team member. We pursue this by prioritizing employee training, by rewarding success and promoting from within, and by maintaining a decentralized culture where ideas and innovation flow in all directions, not just from the top down.
‘Close to our customers’ refers to our local distribution infrastructure – the hubs, trucks, in-market servicing locations, and point-of-use solutions that shorten and simplify the supply chain. It also refers to something less tangible (but closely related) – the customer relationships, collaboration, and strategic alignment afforded by our local presence.
‘World-class resources’ describes the ever-expanding suite of products, services, solutions, and specialists we draw upon to meet each customer’s unique business needs. With offerings that range from custom manufacturing, to subject matter experts in areas like safety and engineering, to e-business and automated supply solutions, we provide value far beyond selling and shipping products. In an industry that’s becoming increasingly centralized, standardized, and transactional, we’re growing faster – and more profitably – by continuing to invest in the fundamentals of effective service: great people, close to our customers, backed by world-class resources.
Overview of Fastenal's latest earnings report
The numbers we are interested in (for first two quarters of 2019):
- Net sales: $2.677 billion (up from $2.453 billion for the same period of the previous year)
- Net sales increased by 9.13% over the last 12 months
- Cost of sales: $1.411 billion (up from $1.258 billion for the same period of the previous year)
- Cost of sales increased 12.16%by over the last 12 months
- Net earnings: $398.7 million (up from $385.5million for the same period of the previous year)
- Diluted earnings per share: $0.69 (up from $0.67 for the same period of the previous year)
- Diluted weighted-average shares outstanding: 573.8 million (up from 575.1 million for the same period of the previous year)
- Cash and cash equivalents: $175 million
- Cash and cash equivalents per share: $0.30
- Cash and cash equivalents makes up 0.98% of Fastenal's market capital
- Cash and cash equivalents makes up 4.65% of Fastenal's total assets
- Accounts receivable: $819.8 million
- Accounts receivable makes up 21.8% of Fastenal's total assets
- Inventories: $1.354 billion
- Inventories makes up 35.8% of Fastenal's total assets
- Stockholders equity in Fastenal: $2.503 billion
- Stockholders equity per share: $4.36
- So Fastenal is trading a 7.12 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
- Cash generated from operations (for the 6 months): $333 million
- Cash generated from operations per share (for the 6 months): $0.58
Fastenal's management commentary on the results
WINONA, Minn., July 11, 2019 (BUSINESS WIRE) -- Fastenal Company (Nasdaq:FAST), a leader in the wholesale distribution of industrial and construction supplies, today announced its financial results for the quarter ended June 30, 2019.
We signed 11,042 industrial vending devices during the first six months of 2019 and 5,439 devices during the second quarter of 2019. Our installed device count on June 30, 2019 was 85,871, an increase of 12.9% over June 30, 2018. Daily sales through our vending devices grew at a low-teens pace in the second quarter of 2019 over the second quarter of 2018 due to the increase in the installed base. These device counts do not include slightly more than 15,000 vending devices deployed as part of a lease locker program. Our goal for vending device signings in 2019 remains 23,000 to 25,000 units. We signed 199 new Onsite locations (defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility) during the first six months of 2019 and 94 new Onsite locations during the second quarter of 2019. We had 1,026 active sites on June 30, 2019, which represented an increase of 34.8% from June 30, 2018. Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a high-teens pace in the second quarter of 2019 over the second quarter of 2018. Our goal for Onsite signings in 2019 remains 375 to 400. We signed 51 new national account contracts (defined as new customer accounts with a multi-site contract) in the second quarter of 2019, and revenues attributable to national account customers represented 53.3% of our total revenues in the period. Daily sales to our national account customers grew 12.5% in the second quarter of 2019 over the second quarter of 2018.
During the last twelve months, we increased our absolute employee headcount by 684 people in our in-market locations and 1,377 people in total. The increase is mostly a function of additions we have made to support customer growth in the field as well as investments in our growth drivers. We opened three branches in the second quarter of 2019 and closed 24 branches. One branch was converted from a public branch to a non-public location. We activated 95 Onsite locations in the second quarter of 2019 and closed 14. Our in-market network forms the foundation of our business strategy, and we will continue to open or close locations as is deemed necessary to sustain and improve our network, support our growth drivers, and manage our operating expenses.
We signed 11,042 industrial vending devices during the first six months of 2019 and 5,439 devices during the second quarter of 2019. Our installed device count on June 30, 2019 was 85,871, an increase of 12.9% over June 30, 2018. Daily sales through our vending devices grew at a low-teens pace in the second quarter of 2019 over the second quarter of 2018 due to the increase in the installed base. These device counts do not include slightly more than 15,000 vending devices deployed as part of a lease locker program. Our goal for vending device signings in 2019 remains 23,000 to 25,000 units. We signed 199 new Onsite locations (defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility) during the first six months of 2019 and 94 new Onsite locations during the second quarter of 2019. We had 1,026 active sites on June 30, 2019, which represented an increase of 34.8% from June 30, 2018. Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a high-teens pace in the second quarter of 2019 over the second quarter of 2018. Our goal for Onsite signings in 2019 remains 375 to 400. We signed 51 new national account contracts (defined as new customer accounts with a multi-site contract) in the second quarter of 2019, and revenues attributable to national account customers represented 53.3% of our total revenues in the period. Daily sales to our national account customers grew 12.5% in the second quarter of 2019 over the second quarter of 2018.
During the last twelve months, we increased our absolute employee headcount by 684 people in our in-market locations and 1,377 people in total. The increase is mostly a function of additions we have made to support customer growth in the field as well as investments in our growth drivers. We opened three branches in the second quarter of 2019 and closed 24 branches. One branch was converted from a public branch to a non-public location. We activated 95 Onsite locations in the second quarter of 2019 and closed 14. Our in-market network forms the foundation of our business strategy, and we will continue to open or close locations as is deemed necessary to sustain and improve our network, support our growth drivers, and manage our operating expenses.
Fastenal (NASDAQ: FAST) stock price history
The image below, obtained from Google, shows the stock price history of Fastenal over the last 5 years. And it's been a good time for Fastenal stockholders. 5 years ago the stock was trading at around $21.30 a stock and its currently trading at $31.03 a stock. That's a decent return of 45.6% provided to Fastenal stockholders over the last 5 years. The stock of Fastenal is trading at a lot closer to its 52 week high of $35.94 than it is 52 week low of $24 which to us is a clear indication that short term sentiment and momentum of Fastenal's stock is positive.
Recent coverage of Fastenal
The extract below covers some of the latest news (as published 25 September 2019) regarding Fastenal as obtained from TheStreet.com
The milestones continue to accumulate for Fastenal in 2019. In June, Fastenal celebrated its 100,000 th active vending machine. In July, it announced its 1,000 th Onsite location. And now, September brings 25 years as an international company. For much of 1994, Fastenal was only in the United States, known primarily as a Midwest fastener distributor, with fewer than 350 locations and $162 million in annual sales. In September, our first branch outside of the U.S. was opened in Stoney Creek, Ontario, Canada, with just two employees. This humble beginning set the stage for a remarkable success story. As of today, Fastenal's presence in Canada includes more than 1,500 employees, 250 in-market locations, 7,000 vending machines, and two regional distribution centers. Thanks to these individuals and resources, Fastenal Canada accounted for over 6% of total company revenues, or $300 million, in 2018. Fastenal's success in Canada led to new opportunities for the 'Blue Team' around the world. In 2001, a branch was opened in Monterrey, Mexico, followed by another in Singapore - Fastenal's first step beyond North America.
The milestones continue to accumulate for Fastenal in 2019. In June, Fastenal celebrated its 100,000 th active vending machine. In July, it announced its 1,000 th Onsite location. And now, September brings 25 years as an international company. For much of 1994, Fastenal was only in the United States, known primarily as a Midwest fastener distributor, with fewer than 350 locations and $162 million in annual sales. In September, our first branch outside of the U.S. was opened in Stoney Creek, Ontario, Canada, with just two employees. This humble beginning set the stage for a remarkable success story. As of today, Fastenal's presence in Canada includes more than 1,500 employees, 250 in-market locations, 7,000 vending machines, and two regional distribution centers. Thanks to these individuals and resources, Fastenal Canada accounted for over 6% of total company revenues, or $300 million, in 2018. Fastenal's success in Canada led to new opportunities for the 'Blue Team' around the world. In 2001, a branch was opened in Monterrey, Mexico, followed by another in Singapore - Fastenal's first step beyond North America.
Fastnal (NASDAQ: FAST) latest stock valuation
So what is Fastenal stock worth based on the release of their latest earnings report? Based on Fastenal's latest earnings report our valuation models provide a target (full value) price of Fastenal stock at $27.10 a stock. Therefore we believe the stock of Fastenal is overvalued.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price of $27.10, so a good entry point into Fastenal would be at $24.40 or below. We expect that the stock of Fastenal will pull back in coming weeks and months to levels closer to our target (full value) price.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price of $27.10, so a good entry point into Fastenal would be at $24.40 or below. We expect that the stock of Fastenal will pull back in coming weeks and months to levels closer to our target (full value) price.