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Stock Market News Today: Oct. 11, 2019

By Timothy Green - Updated Oct 11, 2019 at 1:49PM

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Spirit removes some pessimism from its forecast, and Fastenal drives growth with vending machines.

Optimism surrounding the trade talks between the U.S. and China propelled the major stock indices higher on Friday. President Donald Trump has said that the negotiations are going "very well," and he plans to meet with the top Chinese negotiator today.

Index Change at 12:30 p.m. EDT
Dow Jones Industrial Average (^DJI 0.06%) 1.47%
S&P 500 (^GSPC 0.23%) 1.47%
Nasdaq Composite (^IXIC 0.00%) 1.69%

Data source: Yahoo! Finance.

Shares of budget airline Spirit (SAVE -0.94%) and wholesaler Fastenal (FAST 0.18%) were star performers on Friday. Spirit stock was boosted by an improved third-quarter outlook, and Fastenal stock soared following a solid third-quarter report.

Spirit improves its outlook

Shares of Spirit have tumbled this year, brought down by trade war fears, weak third-quarter guidance, and a concerning cost outlook from Delta. The budget airline stock has lost about 35% of its value since the start of 2019.

The picture brightened a bit on Friday when Spirit updated its third-quarter guidance for the better. The company is seeing a lower-than-expected impact on forward bookings related to Hurricane Dorian, and passenger volumes have exceeded expectations. Total revenue per available seat mile is now expected to decline by just 2% in the third quarter, as opposed to a 2.5% to 3.5% decline the company anticipated in early September.

A Spirit airplane.

Image source: Spirit.

Spirit's outlook for adjusted cost per available seat mile excluding fuel has also improved. The company now sees an 8.5% increase in the third quarter, down from a previous guidance range calling for a 9% to 10% increase. Spirit credited lower crew disruption and passenger reaccommodation expenses for the improvement.

This positive update sent shares of Spirit soaring. The stock was up 10.2% at 12:30 p.m. EDT, enough to erase a portion of its losses over the past six months. With Spirit trading for a single-digit multiple of earnings, the budget airline could be an interesting value opportunity for investors.

Fastenal beats expectations

Solid revenue and profit growth for industrial supplies wholesaler Fastenal in the third quarter lit a fire under the stock on Friday. While sales were in line with analyst expectations, a modest earnings beat put investors in a good mood. Fastenal stock was up 17% by 12:30 p.m. EDT.

Fastenal grew its third-quarter revenue by 7.8% from the prior-year period, producing net sales of $1.38 billion. An extra selling day helped the cause, but sales would have still increased by 6.1% without that extra day. The company is still seeing slowing economic activity, but growth in industrial vending and higher product prices pushed up the top line.

Earnings per share were up 8% to $0.37, edging out the average analyst estimate by $0.01. Gross profit was down 0.9 percentage points year over year thanks to growth in industrial vending and on-site locations, which carry lower gross margins than other channels. The company signed 5,671 industrial vending devices during the third quarter, bringing its total installed base to 88,327 devices.

Fastenal is delivering growth against a backdrop of tariffs and economic uncertainty. The stock carved out a new 52-week high on Friday thanks to its strong third-quarter results.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines and Spirit Airlines. The Motley Fool recommends Fastenal. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Fastenal Company Stock Quote
Fastenal Company
$55.80 (0.18%) $0.10
Spirit Airlines, Inc. Stock Quote
Spirit Airlines, Inc.
$24.25 (-0.94%) $0.23
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,999.04 (0.06%) $18.72
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,283.74 (0.23%) $9.70
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$12,938.12 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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