What happened

The shares of Fastenal Company (FAST 1.80%), an industrial supplier of fasteners, tools, and other supplies, rose an impressive 15% in January, according to data provided by S&P Global Market Intelligence. That was likely a relief for investors, who saw the stock fall nearly 12% in December and roughly 4% for all of 2018. What was most interesting about January's performance, however, was the material spike higher in the middle of the month -- just when Fastenal reported earnings.

So what

As an industrial company, Fastenal is sensitive to the ups and downs of the economy. When its customers experience slowing demand, they don't order as many fasteners because they simply don't need them. That, in turn, puts a crimp in Fastenal's business. Although the U.S. economy has been doing fairly well lately, there have been increasing concerns that the good times can't last forever -- a fact that recently caused the U.S. Federal Reserve to soften its stance on interest rate hikes. This was a key driver of Fastenal's weak showing in December and for the year overall.

A woman at a vending machine.

Image source: Getty Images.

When Fastenal reported 2018 financial results, however, there was no question that the company remains in growth mode. Year-over-year fourth-quarter earnings advanced 11% on a 13% top-line gain. The full-year numbers were even better, with earnings up 30% on a 13% revenue increase. Fastenal is clearly doing very well today despite investor concerns about the economy. So it makes sense that when investor sentiment turned more positive in January, Fastenal shares picked up. And when the company reported strong growth in the middle of the month, the shares got another shot of adrenaline.

That said, there's an important nuance to monitor here. The company closed 147 locations in 2018. At first, that sounds pretty bad, but it isn't. Fastenal has been shifting its business model toward on-site locations to better integrate with its customers. That has, notably, included vending machines -- the company grew its vending fleet by 14% in 2018, adding more than 22,000 vending devices. The trend toward on-site locations is the one to watch here, and it looks like the results are still strong. That's a trend that bodes well for financial results in 2019.

Check out the latest Fastenal earnings call transcript.

Now what

Investor sentiment helped turn December's share price decline around in January, with an extra boost from strong 2018 earnings. The key story on the earnings front, meanwhile, is Fastenal's continued successful shift toward on-site locations. That said, the dour mood on Wall Street that pushed the company's shares lower at the end of 2018 shouldn't be ignored. Fastenal operates in the cyclical industrial sector, and the U.S. growth streak is, indeed, looking a little long in the tooth.

There's nothing imminent to suggest a downturn is in the cards, but if you buy Fastenal, you should go in knowing that when the next downturn hits, the company will feel the hit on the top and bottom lines. And, more to the point, investors are likely to push the shares lower again even if the company's shift toward on-site locations continues to progress as expected.