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Worried About an Economic Slowdown? Fastenal’s Earnings Won’t Help.

Worried About an Economic Slowdown? Fastenal’s Earnings Won’t Help.

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Boxes of hardware at a Fastenal distribution center in Pennsylvania

Luke Sharrett/Bloomberg

Fastenal’s quarterly earnings report, which sent shares of the industrial distributor sharply lower on Tuesday morning, makes a difference beyond the implications for the stock itself.

Fastenal (ticker: FAST) is one of the earliest industrial companies to report numbers. Larger, better-known industrial companies start disclosing their third quarter earnings in a couple of weeks.

More important, Fastenal is a distributor of thousands of small, lower- priced items used by businesses around the U.S. every day. Its sales trends are a good, real-time indicator of what is going on at the shop-floor level. The figures offer clues for investors about the coming earnings season and about the health of the U.S. economy.

“I find Fastenal to be a great bellwether for the industrial side of the U.S. economy,” said Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, via email. “The tone of the third quarter of 2020 can best be described as one of normalization following the heavily pandemic-influenced second quarter of 2020.”

For the third quarter, Fastenal reported 38 cents in per-share earnings, one penny ahead of Wall Street consensus estimates and one penny more than the company earned in the third quarter of 2019. Sales, however, just missed expectations.

Growth in average daily sales decelerated to 2.5% from more than 10% in the second quarter. Third-quarter growth was also below daily sales growth in the first quarter of 2020. The “surge activity eased in [the third quarter],” reads Fastenal’s quarterly presentation. “But demand for pandemic-related products remains elevated, contributing to 34.4% growth in safety supplies.”

Baird analyst Dave Manthey said that while figures on September sales and profit margins might have disappointed the Street, he still likes the stock. “Results were strong despite the

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