What happened

Shares of industrial parts supplier Fastenal Company (NASDAQ:FAST) rose 16% in April according to data from S&P Global Market Intelligence, edging slightly ahead of the 13% or so gain of the S&P 500 index. The stock started to move steadily ahead of the broader market following its earnings release on April 14, but the relatively good news in that report shouldn't have been a surprise. 

So what

Fastenal provided monthly sales updates throughout the first quarter. Each month saw a top-line increase in the low-to-mid single digits. However, the big change came in March, when the company broke out its safety equipment sales. Fasteners, the industrial firm's namesake product line, saw a 10% drop in daily sales in March while safety came in with a 31% increase ("other" was down 2.5%). All in, the overall results were still positive, showing the inherent benefits of diversification.   

A pile of nuts and bolts.

Image source: Getty Images.

It shouldn't have been much of a surprise to see first-quarter earnings come in with a 4.4% year-over-year top-line advance and a bottom-line gain of 4%. Given the spreading impact of COVID-19, those are pretty strong results. Investors should be impressed. April sales results, released on May 6, showed a continuation of the trend, with overall sales up a solid 6.7% year over year driven by the safety business' 120% sales gain.

However, the decline in the fasteners business steepened, with a year-over-year drop of 22.5% in April, and the "other" business also fell more, dipping 10%. This is a decidedly mixed picture. The safety business only represented 18% of the company's sales in 2019. These are uncertain times and it's far from clear how long this one business can sustain Fastenal's overall results. The U.S. is highly likely to fall into a recession, if it isn't already in one, so investors are only just starting to see the impact here -- and it could get worse before it gets better. 

Now what

So far, Fasental has done a good job of weathering the hit from the economic shutdowns related to COVID-19. Still, long-term investors shouldn't expect that trend to continue, as the company's safety business probably isn't large enough to keep offsetting the declines being experienced in other parts of the company. All in, it seems prudent to expect choppy waters ahead as the world, and Fastenal, continues to adjust to the impact of the coronavirus.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.