Can Fastenal Earnings Grow Faster?

Fastenal (NASDAQ: FAST  ) will release its quarterly report on Wednesday, and investors are looking for good things from the wholesale and retail seller of supplies for the industrial and construction sectors both domestically and around the world. Along with growth in Fastenal earnings, shareholders would like to see the company hold off competitors MSC Industrial (NYSE: MSM  ) and W.W. Grainger (NYSE: GWW  ) and sustain its competitive advantages in the industry.

Fastenal's two-pronged approach toward its business has served it well, as it both works with its business customers to provide goods that they then integrate into their own products, as well as selling directly to end-users. Fastenal's innovative spirit has helped it outpace MSC Industrial and Grainger in overall sales, but the challenge is always to translate top-line growth into bottom-line profits. Let's take an early look at what's been happening with Fastenal over the past quarter and what we're likely to see in its report.

Stats on Fastenal

Analyst EPS Estimate

$0.41

Change From Year-Ago EPS

10.8%

Revenue Estimate

$866.03 million

Change From Year-Ago Revenue

7.9%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Can Fastenal earnings finally give shareholders a nice surprise?
Analysts have gotten a bit more cautious about Fastenal earnings prospects in recent months, cutting third-quarter estimates by a penny per share and full-year 2013 projections by triple that. The stock has performed quite well, though, with gains of 12% since early July.

Fastenal began the quarter with somewhat uninspiring news from its second quarter, as net income rose 8% on a 5% rise in overall sales. A combination of higher store counts and a doubling of availability of its FAST Solutions vending machines, which help industrial customers get easier access to oft-needed goods, from year-ago levels helped bolster the company's revenue.

But this quarter, Fastenal has picked up more momentum. July sales growth was 2.9% in July but accelerated to 7.2% in August, helping send the stock substantially higher. As conditions in the industrial sector have continued to improve, Fastenal stands to ride the industry's coattails higher as well.

Still, Fastenal's competitors aren't standing still. Grainger announced in August that it had acquired E&R Industrial Sales, adding metalworking expertise to its already impressive lineup of maintenance, repair, and operations products. Grainger also changed its internal business structure to emphasize the international nature of its business. Meanwhile, MSC Industrial expanded internally with its new co-headquarters facility in North Carolina adding to the breadth of its business coverage.

In the Fastenal earnings report, watch to see whether the company's strong monthly revenue figures translate to bottom-line profits. If they don't, then Fastenal's recent gains could give way to minor setbacks in short order.

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