Core Viewpoint - Fastenal (FAST) is anticipated to report flat earnings of $0.52 per share for the quarter ended March 2025, with revenues expected to reach $1.94 billion, reflecting a 2.5% increase from the previous year [3][12]. Earnings Expectations - The upcoming earnings report is scheduled for April 11, and the stock may experience upward movement if actual earnings exceed expectations, while a miss could lead to a decline [2][3]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4][10]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, suggesting no recent changes in analyst views [10][11]. - A positive Earnings ESP is generally a strong indicator of an earnings beat, especially when combined with a favorable Zacks Rank [8]. Historical Performance - Fastenal has not surpassed consensus EPS estimates in the last four quarters, with the most recent quarter showing a -4.17% surprise [12][13]. - The company's historical performance indicates challenges in meeting or exceeding earnings expectations, which may affect investor sentiment [14][16].

Group 1 - The article initiates coverage of Fastenal (NASDAQ: FAST) with a buy rating, highlighting its nearly 10% average annualized return over the past 3 years and dividends exceeding 2% per annum [1] - Fastenal demonstrates strong financial performance and extremely high solvency, positioning it as an attractive investment opportunity [1] - The author emphasizes a conservative investment strategy, focusing on a mix of quantitative and fundamental analysis to evaluate companies [1] Group 2 - The analysis aims to provide private investors with an independent view of large and well-known companies based on factual financial data [1] - The author has been investing in US equities since 2018 and has a background in economic theory, enhancing the credibility of the analysis [1]

Core Viewpoint - Fastenal Inc. is facing challenges due to muted industrial manufacturing and construction activity, but it remains resilient with growth in on-site locations and innovative inventory management solutions [3][4][7]. Group 1: Company Performance - Fastenal reported Q4 2024 EPS of 46 cents, missing estimates by 2 cents, while revenues rose 3.9% YoY to $1.82 billion, falling short of the $1.84 billion consensus estimates [7]. - For the full year 2025, Fastenal signed 358 on-site locations, a 10% YoY increase, although it was below the target of 375 to 400 [5]. - The average customer site spends about $38,000 per month, with a 9% annual increase in the number of customer sites since 2017 [6]. Group 2: Growth Drivers - Fastenal signed 6,790 weighted FASTBin and FASTVend devices in Q4, which are key growth drivers for inventory management [8]. - The company aims for between 28,000 to 30,000 MEUs in FASTBin and FASTVend signings for 2025 [8]. - Revenue from customer sites spending at least $50,000 per month has grown at a compound annual growth rate of 18% since 2017 [6]. Group 3: Market Context - Despite competition from peers like W.W. Grainger Inc. and MSC Industrial Direct Co., Fastenal's stock has traded up nearly 4% in 2025 [4]. - The company is well-positioned in Los Angeles, which could benefit from infrastructure rebuilding efforts following recent wildfires [4].

Share Repurchase and Stock Options - As of December 31, 2024, the company had remaining authority to repurchase 6,200,000 shares of common stock under the July 12, 2022 authorization, which originally allowed for the repurchase of up to 8,000,000 shares[179] - The company did not purchase any shares of common stock in the last three months of 2024[179] - Stock options granted in January 2025 included 639,304 shares at an exercise price of $72.00 per share[367] - As of December 31, 2024, there were 4,227,927 stock options outstanding with a weighted average exercise price of $45.93 and a remaining life of 6.28 years[372] - The company granted 814,912 stock options in 2024 with an exercise price of $64.00[372] - The total intrinsic value of stock options exercised during the years ended December 31, 2024, 2023, and 2022 was $57.6 million, $38.1 million, and $10.2 million, respectively[372] - The total grant date fair value of stock options vested under the employee stock option plan during 2024 was $7.6 million[373] - The company reported a total of 913,296 anti-dilutive options excluded from the diluted net income per share calculation for 2024[377] Financial Performance - Net sales for 2024 reached $7,546.0 million, an increase of 2.7% from $7,346.7 million in 2023[320] - Gross profit for 2024 was $3,401.9 million, up from $3,354.5 million in 2023, reflecting a gross margin of approximately 45%[320] - Net income for 2024 was $1,150.6 million, slightly down from $1,155.0 million in 2023, resulting in a basic net income per share of $2.01[320] - Operating income for 2024 was $1,510.0 million, slightly down from $1,528.7 million in 2023, indicating stable operational performance[320] - The company reported a comprehensive income of $1,113.9 million for 2024, compared to $1,165.0 million in 2023, reflecting foreign currency translation adjustments[323] - Total revenues for 2024 reached $7,546.0 million, a 2.7% increase from $7,346.7 million in 2023[360] - U.S. net sales from external customers reached $6,273.1 million in 2024, up from $6,139.8 million in 2023, indicating a growth of 2.2%[400] Assets and Inventory - The company held $1,645.0 million in inventory as of December 31, 2024, with the majority located at 3,628 in-market locations[313] - Total current assets increased to $3,211.9 million in 2024 from $3,020.9 million in 2023, driven by higher inventories and trade accounts receivable[318] - Total assets grew to $4,698.0 million in 2024, compared to $4,462.9 million in 2023, indicating a solid asset base for future operations[318] - Long-lived assets totaled $1,486.1 million at the end of 2024, an increase from $1,442.0 million in 2023[362] Cash Flow and Dividends - Cash and cash equivalents at the end of 2024 were $255.8 million, up from $221.3 million in 2023, showing improved liquidity[328] - The company paid cash dividends of $893.3 million in 2024, down from $1,016.8 million in 2023, with a dividend per share of $1.56[326] - The company paid an aggregate annual cash dividend of $1.56 per share in 2024, compared to $1.78 in 2023[366] Debt and Interest - The company has a total debt outstanding of $200.0 million as of December 31, 2024, down from $260.0 million in 2023, indicating a reduction of 23.1%[391] - The average interest rate on the company's unsecured revolving credit facility is 5.36% as of December 31, 2024[391] - A one percentage point increase in floating rate debt in 2024 would have resulted in approximately $0.3 million of additional interest expense[302] Internal Controls and Compliance - The company maintained effective internal control over financial reporting as of December 31, 2024, in accordance with U.S. generally accepted accounting principles[306] - The company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting[310] - There were no changes or disagreements with accountants on accounting and financial disclosure[408] Taxation - The effective income tax rate for 2024 was 23.7%, compared to 24.1% for 2023 and 24.5% for 2022[379] - Income before income taxes for 2024 was $1,508.1 million, a slight decrease from $1,522.0 million in 2023[379] - As of December 31, 2024, the total net deferred income tax assets were $107.3 million, compared to $104.8 million in 2023[381] - The company has approximately $539.6 million of undistributed income from foreign subsidiaries, which continues to be permanently reinvested, resulting in no deferred taxes for withholding taxes upon repatriation[383] Operating Leases - Operating lease costs for 2024 totaled $171.1 million, an increase from $153.4 million in 2023, reflecting a year-over-year growth of 11.5%[387] - The total lease payments due for operating leases amount to $309.9 million as of December 31, 2024, with a present value of lease liabilities at $285.4 million[388] - The company recorded cash paid for operating leases of $119.0 million in 2024, compared to $115.7 million in 2023, reflecting an increase of 2.9%[390] Market Presence - Fastenal operates over 3,600 in-market locations primarily in North America, supporting its distribution network for industrial and construction supplies[331] - Revenue from the United States accounted for 83.1% of total revenues in 2024, slightly down from 83.6% in 2023[360] - The manufacturing sector represented 75.0% of total sales in 2024, up from 74.3% in 2023[360] - The fastener product line accounted for 30.7% of total sales in 2024, down from 32.4% in 2023[360]

Group 1 - The core thesis on Fastenal Company (NASDAQ: FAST) is neutral, acknowledging positive aspects of the 4Q24 earnings while highlighting near-term challenges in the industrial sector, potential margin compression, and slower growth in key segments like fastener sales [1] - The investment approach emphasizes a blend of value investing principles and a focus on long-term growth, advocating for the purchase of quality companies at a discount to their intrinsic value [1]

Financial Data and Key Metrics - Q4 2024 sales grew by 3.7%, with daily sales up 2.1% [7] - EPS for Q4 2024 was $0.46, down 2% year-over-year [8] - Operating margin in Q4 2024 was 18.9%, down 120 basis points year-over-year [60] - Gross margin in Q4 2024 was 44.8%, down 70 basis points from the previous year [62] - Operating cash flow for Q4 2024 was $283 million, representing 108% of net income [64] - Full-year 2024 operating cash flow was $1.2 billion, or 102% of net income [64] - Net capital spending in 2024 was $214 million, below the projected range of $235 million to $265 million [68] Business Line Data and Key Metrics - MRO-oriented products outperformed OEM-oriented products, with safety products up 4.8% and fasteners down 1.4% [55] - National accounts grew by 4.2%, while non-national accounts declined by 1% [55] - Manufacturing end markets grew by 3.3%, while non-manufacturing end markets declined by 0.3% [56] - Industrial services revenue exceeded $100 million for the first time in 2024 [36] - FMI Technology accounted for 44% of revenue in Q4 2024, up from 42% and 39% in the previous two years [42] - E-commerce grew by 28%, with e-procurement growing by 37.6% [43] Market Data and Key Metrics - In December 2024, sales growth was initially trending towards 3%+ but collapsed in the last five days, resulting in flat growth for the month [9][10] - 35% of facilities with vending machines saw activity drop by more than 75% during the holiday shutdown in 2024, up from 30% in 2023 and 25% in 2022 [17][18] - The week after Christmas saw 17% of facilities shut down, compared to 5-6% in previous years [18] - The Southern US regions experienced disruptions due to winter storms, leading to the cancellation of 6% of truck routes through January 10 [59] Company Strategy and Industry Competition - The company plans to shift focus from Onsite signings to customers generating $10,000 or more in monthly sales, emphasizing the importance of customer value over quantity [72] - Fastenal aims to increase its digital footprint, targeting 66-68% of sales through eBusiness and FMI Technology in 2025, up from 62% in 2024 [44] - The company is investing in AI and digital tools to improve service and expand its addressable market [74] - Fastenal is expanding its distribution center network, with new hubs in Utah and Atlanta, and increasing automated picking capabilities [70] Management Commentary on Operating Environment and Future Outlook - Management noted a challenging year with a frustrating finish, citing lost leverage due to slower growth [7] - Post-election customer optimism is growing, with regional leadership citing improved sentiment for 2025 [59] - The company expects incremental margins to strengthen in 2025, driven by revenue growth and effective cost management [45] - Management anticipates a flattish gross margin for 2025, with potential improvements in fastener performance and easing pressures in the warehousing space [141] Other Important Information - Fastenal raised its quarterly dividend by approximately 10%, with an annualized dividend of $1.72 [24] - The company plans to host an Investor Day on March 13, 2025, to discuss strategic initiatives and provide updates on its end-market network [73][74] - CFO Holden Lewis announced his departure effective April 2025, with the company seeking a new CFO to align with its growth trajectory [47][48] Q&A Session Summary Question: How does the company reconcile the intense shutdowns in December with improving customer sentiment? [79] - Management attributed the shutdowns to companies choosing to idle operations over the holidays to prepare for the new year, while post-election optimism has improved sentiment for 2025 [81][84] Question: How concentrated are Fastenal's sales, and what does this mean for the business? [88] - 1% of customer sites generate approximately 50% of sales, with these sites typically being Onsite locations or large customers served through branches [90][93] Question: Is the concentration of sales an opportunity or a limitation? [103] - Management views the concentration as an opportunity, emphasizing the potential to grow wallet share with existing customers and expand into new markets [104][108] Question: How does Fastenal handle tariffs and supply chain disruptions? [117] - The company has developed strong capabilities in managing tariffs and supply chain disruptions, including diverting containers to avoid risks and providing visibility to customers [119][122] Question: What are the company's plans for improving e-commerce and unplanned spend? [129] - Fastenal is focusing on improving product availability, enhancing supplier connections, and providing better tracking visibility to enhance the e-commerce experience [130][136] Question: What is the outlook for gross margins and operating expenses in 2025? [139][147] - Management expects gross margins to be flattish in 2025, with potential improvements in fastener performance, while operating expenses are expected to leverage with mid-single-digit growth [141][148]

Earnings and Sales Performance - Fastenal reported Q4 2024 EPS of 46 cents, missing the Zacks Consensus Estimate by 4.2% and remaining flat year over year [4] - Net sales totaled $1.82 billion, missing the consensus mark of $1.84 billion by 1.1% but increasing 3.7% from the year-ago level [4] - Daily sales of $29 million increased 2.1% year over year despite one extra selling day, limited by a soft manufacturing environment and sharp year-end production cuts by major customers [5] - Foreign exchange rates negatively impacted sales by 20 bps, compared with a 10-bps positive impact in the year-ago quarter [5] Sales Breakdown by Product and Market - Daily sales of Fasteners (29.9% of net sales) declined 1.4% year over year, while Safety Supplies (23%) grew 4.8% and Other Product Lines (47.1%) increased 4% [7] - Heavy Manufacturing (42.3% of net sales) daily sales rose 1.7% year over year, while Other Manufacturing (32%) grew 5.4% [8] - Non-Residential Construction and Reseller daily sales declined 4.1% and 11.3%, respectively, while Other End-Markets grew 7.6% [8] - Daily sales through weighted FMI devices grew 8.2%, representing 43.9% of net sales [9] - Daily sales to National Account customers (64.2% of total quarterly net sales) increased 4.2%, while Non-National Account customers (35.8%) declined 1% [9] Onsite Locations and Digital Footprint - Fastenal signed 56 new Onsite locations in Q4 2024, bringing the total for 2024 to 358, with 2,031 active sites as of Dec. 31, 2024, up 11.5% year over year [12] - Daily sales through Onsite locations increased at a mid-single-digit rate year over year, driven by strong contributions from locations activated in 2024 and 2023 [13] - The company's Digital Footprint increased to 62.2% of sales from 58.1% in the year-ago period, with expectations of reaching 66% to 68% by 2025 [10] Margins and Expenses - Gross margin was 44.8% in Q4 2024, down 70 bps year over year, due to an unfavorable mix of large customers, non-fastener products with lower margins, higher freight costs, and increased import duties [14] - SG&A expenses as a percentage of net sales increased to 25.9% from 25.3% in the year-ago quarter, driven by seasonally low sales, weak business activity, and continued business investments [15] - Operating margin was 18.9%, down 120 bps from a year ago and lower than the projected 20.2% [15] Full-Year 2024 Highlights - Earnings came in at $2.00 per share, down 0.6% from 2023, while net sales were $7.55 billion, up 2.7% year over year [16] - Daily sales growth rate was 1.9%, with gross margin down 60 bps and operating margin down 80 bps [16] Financial Position and Shareholder Returns - As of Dec. 31, 2024, Fastenal had cash and cash equivalents of $255.8 million, up from $221.3 million as of Dec. 31, 2023 [17] - Long-term debt decreased to $125 million from $200 million at 2023-end [17] - The company returned $223.4 million to shareholders in Q4 2024 and $893.3 million in 2024 through dividends [17] - Net cash provided by operating activities totaled $1.17 million in 2024, down from $1.43 billion in the year-ago period [17] Outlook and Strategic Initiatives - Fastenal expects ongoing investments in technology and infrastructure to enhance operational efficiency and drive growth, with higher capital expenditures planned for 2025 [18] - The company projects that 66% to 68% of its sales will flow through its digital footprint by the end of 2025 [18] - Despite macroeconomic uncertainties, Fastenal's focus on digital transformation and customer-centric services is expected to bolster its long-term market position [18]

Market Performance - U S stocks traded higher with the S&P 500 gaining around 1% the Dow up 0 86% to 43 524 83 and the NASDAQ rising 1 46% to 19 620 72 [1] - Information technology shares surged by 1 8% while health care shares rose by just 0 1% [1] - European shares were higher with the eurozone's STOXX 600 surging 0 74% Germany's DAX 40 gaining 1 15% and France's CAC 40 gaining 1 06% [6] - Asian markets closed mixed with Japan's Nikkei 225 falling 0 31% China's Shanghai Composite Index gaining 0 18% and Hong Kong's Hang Seng Index climbing 0 31% [7] Company Earnings and Performance - Fastenal Company reported weaker-than-expected fourth-quarter earnings with sales growth of 3 7% year-over-year to $1 825 billion missing the consensus of $1 844 billion and EPS of 46 cents missing the estimate of 48 cents [2] - Nukkleus Inc shares shot up 62% to $33 26 after resolving its Nasdaq delisting notice [9] - Versus Systems Inc shares surged 49% to $2 86 after announcing expansion into the Brazilian market [9] - Qorvo Inc shares gained 13% to $83 31 following a WSJ report indicating activist investor Starboard Value acquired a 7 7% stake [9] - Scorpius Holdings Inc shares dropped 27% to $0 27 after announcing a 1-for-20 reverse stock split [9] - BioLineRx Ltd shares were down 21% to $0 096 after announcing a dilutive change in the ratio of American depositary shares to ordinary shares [9] - J B Hunt Transport Services Inc shares fell 7% to $173 60 after reporting fourth-quarter EPS below estimates [9] Commodities - Oil traded down 0 5% to $78 28 while gold traded down 0 1% at $2 748 00 [5] - Silver traded down 1 8% to $31 160 and copper fell 1 4% to $4 3780 [5] Economic Indicators - U S industrial production rose by 0 9% in December topping market estimates of a 0 3% increase [8] - Housing starts rose by 15 8% from the previous month to an annualized rate of 1 499 million units in December [10] - Building permits declined by 0 7% to an annualized rate of 1 483 million in December [10]

FOURTH QUARTER 2024 INVESTOR TELECONFERENCE JANUARY 17, 2025 1 SAFE HARBOR STATEMENT All statements made herein that are not historical facts (e.g., future operating results, long-term share gains, and business activity, as well as expectations regarding operations, including gross and operating income margin, future inventory levels, pricing, Onsite and weighted FMI device signings, operating costs (including SG&A), capital expenditures, sales through our digital footprint, cash flow generation, the potent ...

Company Performance - Fastenal Co's shares declined by 1.9% to $73.38 following disappointing Q4 results, with earnings, revenue, and sales growth missing estimates [1] - The company attributed the weak performance to a "soft manufacturing environment" and higher-than-expected production cuts during the holiday season [1] - Despite recent declines, Fastenal's stock is up 9.5% year-over-year [2] Stock Market Activity - Fastenal has experienced only two negative trading sessions since the start of 2025, with a potential third decline today [2] - The $72 price level, previously a resistance point in July and September, is now acting as support alongside the 200-day moving average [2] Options Trading - Fastenal's options trading volume has surged, with 4,348 calls and 3,201 puts exchanged, representing 9 times the average daily options volume [3] - The January 74.62 call is the most popular contract and holds the top open interest position [3] - Over the past 10 weeks, options traders have shown increased bullishness, with a 50-day call/put volume ratio of 3.50 at major exchanges, ranking higher than 96% of readings from the past year [4]