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Category: Stock Market and Fastenal
Date: 20 January 2019 Stock Price: $36.80 We take a look at the 4th 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 declined following the release of their latest earnings report.
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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 4th quarter 2019 earnings report
Data below refers to the 3rd quarter data unless specified otherwise:
- Net sales: $1.276 billion (up from $1.231 billion for the same period of the previous year)
- Net sales increased by 3.67.8% over the last 12 months
- Cost of sales: $678.5 million (up from $643.8 million for the same period of the previous year)
- Cost of sales increased by 5.4% over the last 12 months
- Net earnings: $178.7 million (up from $168.8 million for the same period of the previous year)
- Diluted earnings per share: $0.31 (up from $0.29 for the same period of the previous year)
- PE ratio: 28.1
- Diluted weighted-average shares outstanding: 575.6 million (up from 572.6 million for the same period of the previous year)
- Cash and cash equivalents: $174.9 million
- Cash and cash equivalents per share: $0.30
- Cash and cash equivalents makes up 0.82% of Fastenal's market capital
- Cash and cash equivalents makes up 4.6% of Fastenal's total assets
- Accounts receivable: $817.3 million
- Accounts receivable makes up 19.5% of Fastenal's total assets
- Inventories: $1.366 billion
- Inventories makes up 35.9% of Fastenal's total assets
- Stockholders equity in Fastenal: $2.665 billion
- Stockholders equity per share: $4.63
- So Fastenal is trading a 7.93 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 12 months): $842.7 million
- Cash generated from operations per share (for the 12 months): $1.46
Fastenal's management commentary on their 4th quarter 2019 results
WINONA, Minn., January 17, 2020 (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 and year ended December 31, 2019. Except for share and per share information, or as otherwise noted below, dollar amounts are stated in millions. Share and per share information in this release, and in the financial statements attached to this release, has been adjusted to reflect the two-for-one stock split effective at the close of business on May 22, 2019
During the last twelve months, we reduced our absolute employee headcount by 38 people in our in-market locations and increased by 304 people in total. The reduction in our absolute employee headcount in our in-market locations reflects actions taken by leadership in our public branches over the past couple of quarters to control expenses in response to weaker demand, which was only partly offset by increases to support growth in our Onsite locations. The increase in our total absolute employee count is mostly from additions we have made to support customer acquisition, implementation, and growth in the field, particularly as it relates to our growth drivers and to support general corporate and hub functions. We opened four branches in the fourth quarter of 2019 and closed 36 branches, net of conversions. We activated 64 Onsite locations in the fourth quarter of 2019 and closed 26, net of conversions. For the full year of 2019, we opened twelve branches and closed 125 branches, net of conversions. For the full year of 2019, we activated 312 Onsite locations and closed 92, net of conversions. 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 $23.15 a stock and its currently trading at $36.80 a stock. That's a decent return of 58.9% provided to Fastenal stockholders over the last 5 years. The stock of Fastenal is trading at very close to its 52 week high of $37.94 and far away from its 52 week low of $27.44, which to us is a clear indication that the sentiment and momentum towards Fastenal is very positive.
Recent coverage of Fastenal
The extract below covers the latest news regarding Fastenal's 4th quarter earnings from Barron's
Industrial distributor Fastenal reported earnings that met Wall Street expectation, but slipping sales growth. What’s more, the company said it expects the “challenging sales environment” to remain through the first half of 2020. “4Q19 business activity slowed further,” reads the CEO message from Dan Florness in the company’s fourth quarter earnings review presentation. “December weakness was likely overstated by holiday timing and customer shutdowns. Feedback from field personnel suggests slow conditions will continue into [the first half of 2020].”
Christmas falling in the middle of the week also didn’t help, but it still doesn’t change the fact that this wasn’t a great earnings report.
Read the full article here
Industrial distributor Fastenal reported earnings that met Wall Street expectation, but slipping sales growth. What’s more, the company said it expects the “challenging sales environment” to remain through the first half of 2020. “4Q19 business activity slowed further,” reads the CEO message from Dan Florness in the company’s fourth quarter earnings review presentation. “December weakness was likely overstated by holiday timing and customer shutdowns. Feedback from field personnel suggests slow conditions will continue into [the first half of 2020].”
Christmas falling in the middle of the week also didn’t help, but it still doesn’t change the fact that this wasn’t a great earnings report.
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 $26.70 a stock. Therefore we believe the stock of Fastenal is overvalued at its current price of $36.80
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price of $36.80 so a good entry point into Fastenal would be at $4.0 or below. We expect that the stock of Fastenal will pull back in coming weeks and months to levels closer to our target price (full value price) in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target (full value) price of $36.80 so a good entry point into Fastenal would be at $4.0 or below. We expect that the stock of Fastenal will pull back in coming weeks and months to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release of Fastenal
It is expected that Fastenal will release their 1st quarter 2020 earnings report in late April 2020