Buy Fastenal Stock for Dividends and More Ahead of Earnings?
Zacks Investment Research | Oct 08, 2020 12:39AM ET
Fastenal FAST helps provide exposure to the broader industrial and construction markets and the stock has climbed 25% in 2020 to blow away the S&P 500. The wholesale distributor is also trending back in the right direction heading into its quarterly earnings release on Tuesday, October 13.
Warehouse Giant…
Fastenal is a wholesale distributor of industrial and construction supplies that range from machinery to lighting. Overall, the Minnesota-based company’s portfolio covers over 10 major product lines, which also includes fasteners, janitorial supplies, and much more. FAST offers various distribution and delivery methods, which includes industrial-style vending machines and bin stock programs.
Fastenal isn’t exposed to the red-hot DIY crowd like Home Depot (NYSE:HD) LOW . Nonetheless, FAST topped our Q2 fiscal 2020 estimates in mid-July, with sales up over 10% and its adjusted earnings up roughly 17%.
The company’s sales were boosted by a spike in demand for personal protective equipment, which did start to taper off in June. Plus, FAST said that its “business activity appears to have bottomed in April before improving in May and again in June,” highlight by its sales rate trend for fasteners, which is its “most cyclical product category.”
What Else…
As we mentioned at the outset, FAST shares have jumped 25% in 2020 to top the S&P 500’s 6% climb. The stock was trading at around $46 per share on Thursday morning, which puts it about 6% off the all-time highs it hit it early September. Investors can also see that Fastenal has outpaced its peer group—Home Depot, Lowe’s, Lumber Liquidators (NYSE:LL) BLDR , and others—over the last five years, up 137% vs. 104%
Fastenal also trades at a discount against its broader industry’s average. On top of that, its 2.16% dividend yield matches Home Depot and easily beats the S&P 500’s 1.66% average.
Peeking ahead, Zacks estimates call for FAST’s Q3 and Q4 FY20 sales to pop 2.4%. Meanwhile, the company’s full-year revenue is projected to jump 5.2% in 2020 to reach $5.61 billion and another 4.8% in FY21.
FAST’s adjusted earnings are expected to climb 5.8% this year and 6.3% higher next year. Fastenal’s overall earnings estimates are up compared to where they were before its last report and it topped our bottom-line estimate by 17% last quarter.
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Bottom Line
Fastenal is a Zacks Rank #3 (Hold) at the moment that also grabs an “A” grade for Growth and a “B” for Momentum in our Style Scores system. And its Building Products – Retail space rests in the top 11% of our more than 250 Zacks industries.
Therefore, investors with a longer-term outlook might want to consider adding FAST for its dividend and exposure to an industry that appears to be heading in the right direction. But it is always risky to buy a stock right before earnings if you are only planning to be in a stock for a shorter period of time.
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