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Category: Stock Market and Fastenal
Date: 12 October 2019 Stock Price: $36.34 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Fastenal, a distributor of a wide variety of construction products with over 2 200 branches. The stock price surged after the release of their latest earnings.
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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
Data below refers to the 3rd quarter data unless specified otherwise:
- Net sales: $1.379 billion (up from $1.279 billion for the same period of the previous year)
- Net sales increased by 7.8% over the last 12 months
- Cost of sales: $728 million (up from $664 million for the same period of the previous year)
- Cost of sales increased by 9.6% over the last 12 months
- Net earnings: $213.5 million (up from $197.6 million for the same period of the previous year)
- Diluted earnings per share: $0.37 (up from $0.34 for the same period of the previous year)
- PE ratio: 24.7
- Diluted weighted-average shares outstanding: 574.4 million (up from 574.5 million for the same period of the previous year)
- Cash and cash equivalents: $191.2 million
- Cash and cash equivalents per share: $0.33
- Cash and cash equivalents makes up 0.92% of Fastenal's market capital
- Cash and cash equivalents makes up 5.01% of Fastenal's total assets
- Accounts receivable: $817.3 million
- Accounts receivable makes up 21.4% of Fastenal's total assets
- Inventories: $1.354 billion
- Inventories makes up 35.51% of Fastenal's total assets
- Stockholders equity in Fastenal: $2.858 billion
- Stockholders equity per share: $4.97
- So Fastenal is trading a 7.31 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 9 months): $590.3 million
- Cash generated from operations per share (for the 9 months): $1.02
Fastenal's management commentary on the results
WINONA, Minn., October 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 September 30, 2019.
We signed 16,713 industrial vending devices during the first nine months of 2019 and 5,671 devices during the third quarter of 2019. Our installed device count on September 30, 2019 was 88,327, an increase of 12.2% over September 30, 2018. Daily sales through our vending devices grew at a mid-teens pace in the third quarter of 2019 over the third 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. We believe slower economic activity has lengthened the sales cycle for vending. As a result, we currently expect to sign approximately 22,000 vending devices in 2019, slightly below our previous goal of 23,000 to 25,000 units. We signed 283 new Onsite locations (defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility) during the first nine months of 2019 and 84 new Onsite locations during the third quarter of 2019.
We had 1,076 active sites on September 30, 2019, which represented an increase of 30.0% from September 30, 2018. Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a low-teens pace in the third quarter of 2019 over the third quarter of 2018, with weak demand impacting more mature sites. Our goal for Onsite signings in 2019 remains 375 to 400. We signed 50 new national account contracts (defined as new customer accounts with a multi-site contract) in the third quarter of 2019, and revenues attributable to national account customers represented 53.5% of our total revenues in the period. Daily sales to our national account customers grew 10.2% in the third quarter of 2019 over the third quarter of 2018.
During the last twelve months, we increased our absolute employee headcount by 379 people in our in-market locations and 756 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 two branches in the third quarter of 2019 and closed 22 branches. One branch was converted from a public branch to a non-public location, and two non-public locations were converted to public branches. We activated 87 Onsite locations in the third quarter of 2019 and closed 35. The number of closings reflects both normal churn in our business, whether due to exiting customer relationships, the shutting or relocation of a customer facility, or a customer decision, as well as a review of certain underperforming locations. 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 16,713 industrial vending devices during the first nine months of 2019 and 5,671 devices during the third quarter of 2019. Our installed device count on September 30, 2019 was 88,327, an increase of 12.2% over September 30, 2018. Daily sales through our vending devices grew at a mid-teens pace in the third quarter of 2019 over the third 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. We believe slower economic activity has lengthened the sales cycle for vending. As a result, we currently expect to sign approximately 22,000 vending devices in 2019, slightly below our previous goal of 23,000 to 25,000 units. We signed 283 new Onsite locations (defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility) during the first nine months of 2019 and 84 new Onsite locations during the third quarter of 2019.
We had 1,076 active sites on September 30, 2019, which represented an increase of 30.0% from September 30, 2018. Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a low-teens pace in the third quarter of 2019 over the third quarter of 2018, with weak demand impacting more mature sites. Our goal for Onsite signings in 2019 remains 375 to 400. We signed 50 new national account contracts (defined as new customer accounts with a multi-site contract) in the third quarter of 2019, and revenues attributable to national account customers represented 53.5% of our total revenues in the period. Daily sales to our national account customers grew 10.2% in the third quarter of 2019 over the third quarter of 2018.
During the last twelve months, we increased our absolute employee headcount by 379 people in our in-market locations and 756 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 two branches in the third quarter of 2019 and closed 22 branches. One branch was converted from a public branch to a non-public location, and two non-public locations were converted to public branches. We activated 87 Onsite locations in the third quarter of 2019 and closed 35. The number of closings reflects both normal churn in our business, whether due to exiting customer relationships, the shutting or relocation of a customer facility, or a customer decision, as well as a review of certain underperforming locations. 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 $20.55 a stock and its currently trading at $36.34 a stock. That's a decent return of 76.83% provided to Fastenal stockholders over the last 5 years. The stock of Fastenal is trading at very close to its 52 week high of $36.58 and far away from its 52 week low of $24, which to us is a clear indication that the sentiment and momentum towards Fastenal is very positive. The stock surged 17.15% after the release of third 3rd quarter earnings yesterday, 11 October 2019.
Recent coverage of Fastenal
The extract below covers the latest news regarding Fastenal's 3rd quarter earnings and stock price surge as obtained from MarketWatch
Shares of Fastenal Co. soared toward a record high Friday, as the industrials company managed to fend off a continued slowing in economic activity and a mysterious weakening in its local construction business to produce a third-quarter profit and sales that rose above Wall Street forecasts. The stock FAST, +17.15% shot up 16.9% in active afternoon trading, putting them on track for the second-biggest one-day gain since the stock went public in August 1987, behind only the record rally of 18.6% on Oct. 30, 1987. Trading volume ballooned to over 24 million shares, compared with the full-day average of about 4.2 million shares.
The company, which makes industrial vending machines, tools and other manufacturing and construction equipment, reported net income for the quarter to Sept. 30 that increased to $213.5 million, or 37 cents a share, from $197.6 million, or 34 cents a share, in the year-ago period, topping the FactSet consensus of 35 cents a share. Sales increased 7.8% to $1.38 billion, above the FactSet consensus of $1.37 billion, amid higher unit sales and higher product pricing.
Read the full article here
Shares of Fastenal Co. soared toward a record high Friday, as the industrials company managed to fend off a continued slowing in economic activity and a mysterious weakening in its local construction business to produce a third-quarter profit and sales that rose above Wall Street forecasts. The stock FAST, +17.15% shot up 16.9% in active afternoon trading, putting them on track for the second-biggest one-day gain since the stock went public in August 1987, behind only the record rally of 18.6% on Oct. 30, 1987. Trading volume ballooned to over 24 million shares, compared with the full-day average of about 4.2 million shares.
The company, which makes industrial vending machines, tools and other manufacturing and construction equipment, reported net income for the quarter to Sept. 30 that increased to $213.5 million, or 37 cents a share, from $197.6 million, or 34 cents a share, in the year-ago period, topping the FactSet consensus of 35 cents a share. Sales increased 7.8% to $1.38 billion, above the FactSet consensus of $1.37 billion, amid higher unit sales and higher product pricing.
Read the full article here
Fastenal (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 $29.30 a stock. Therefore we believe the stock of Fastenal is overvalued. Even though we do believe it is overvalued our target price was raised from our previous valuation of Fastenal where we valued the stock at $27.10 based on their 2nd quarter 2019 earnings release.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price of $29.30, so a good entry point into Fastenal would be at $26.40 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 once the hype and excitement regarding their latest earnings release subsides.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price of $29.30, so a good entry point into Fastenal would be at $26.40 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 once the hype and excitement regarding their latest earnings release subsides.