Fastenal's Q4 Earnings & Sales Miss Estimates, Stock Down

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]