Fastenal stock rating reiterated at Underperform by Raymond James

Investing.com - Raymond (NSE:RYMD) James maintained its Underperform rating on Fastenal (NASDAQ:FAST), currently valued at $49.64 billion and trading near its 52-week high, following the company’s second-quarter earnings report that exceeded expectations primarily due to stronger gross margins.

Fastenal reported second-quarter earnings per share of $0.29, surpassing both Raymond James and Wall Street expectations of $0.28. The earnings beat was entirely attributed to gross margin performance of 45.3%, which was 20 basis points higher year-over-year and sequentially, compared to analyst expectations of approximately 44.8%. According to InvestingPro data, the company maintains a strong financial health score of "GREAT," though it currently trades at a premium P/E ratio of 43.5x.

The company’s June average daily sales increased 9.8% year-over-year, matching Raymond James’ model and exceeding consensus estimates of 8.8%. On a two-year stack basis, June sales improved by 230 basis points versus May, despite facing calendar day-count headwinds of approximately 100-200 basis points.

Pricing in the second quarter rose 140-170 basis points year-over-year, below prior expectations of 3-4%. Fastenal indicated it would implement additional pricing actions in the third quarter, though the magnitude was not specified.

The company noted that market conditions remained sluggish, with growth coming entirely from large customers spending over $10,000 per month, which increased 11.7% year-over-year, while smaller customer sales declined 3.1%. Fastenal also reduced its 2025 vending signings goal to 25,000-26,000 units from the previous target of 28,000-30,000, and lowered its 2025 capital expenditure forecast to $250-270 million from $265-285 million. Despite market challenges, the company has maintained dividend payments for 33 consecutive years, demonstrating financial resilience. For deeper insights into Fastenal’s financial health and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.

In other recent news, Fastenal reported its second-quarter earnings, revealing earnings per share of 29 cents, which aligned with Morgan Stanley (NYSE:MS)’s estimates and slightly exceeded the consensus expectation of 28 cents. The company also saw a 9.8% year-over-year increase in June daily sales, surpassing typical seasonal patterns. Gross margin improved to 45.3%, exceeding the consensus estimate of 45.0%. Morgan Stanley maintained its Equalweight rating on Fastenal, with a price target of $43.00, noting positive indicators for the second half of the year.

Additionally, Fastenal announced a two-for-one stock split, which will double the number of shares owned by investors. This stock split will be effective on May 21, 2025, with trading on a split-adjusted basis commencing on May 22, 2025. Meanwhile, Raymond James reiterated an Underperform rating for Fastenal, citing concerns about the company’s valuation and its reliance on opening new sites for sales growth. The firm expressed caution over market expectations for double-digit sales growth, considering the broader economic factors like tariffs that could impact profitability.

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