Sluggish construction and manufacturing sales caused Winona-based Fastenal Co. to miss third-quarter earnings expectations by a hair and caused the stock to slump 6 percent Wednesday.
Fastenal, which sells safety supplies and nuts, bolts and other fasteners to construction and manufacturing firms through retail stores and industrial vending machines, saw its stock price fall after missing Wall Street’s consensus estimate by a penny per share.
The stock price fell 6.23 percent to $46.85 a share Wednesday despite the fact that sales actually jumped 7 percent during the quarter.
Company officials blamed the sluggish economy for not pushing sales higher. They noted that smaller customers seemed to be experiencing more of a slowdown than large national customers. Also, commercial construction firms seemed to be struggling more than residential contractors who were finally enjoying an upswing in the housing market, company officials said.
Analysts said Wednesday that Fastenal’s overall performance during the quarter was positive, but not as robust as investors had hoped.
“You have sluggish sales growth, which is indicative of the economy. Sales are improving. But mid-single-digit sales growth is not going to cut it for Fastenal,” said Logan Purk, equity research analyst for Edward Jones.
For the quarter, total Fastenal sales rose 7 percent to $858 million. Net income rose 9.2 percent to $119.3 million, or 40 cents a share. On average, analysts expected 41 cents a share and $862 million in sales.
Despite recent manufacturing reports that signal a possible industrial upturn and a “Made in America” renaissance, individual manufacturers are saying the environment continues to be tepid.
Meanwhile, Fastenal officials remained upbeat.
In speaking to analysts during a conference call Wednesday, CEO Willard Oberton said, “Sales came in about where we thought it would be for the quarter. July was a tough month, but we came back nicely in August and had a good growth month in September. ... So we’re moving ahead nicely.”
Still, sales and profit margins for fastener products were stretched during the quarter as customers pushed for pricing cuts. Historically, fastener products bring in the highest margins. But “we had growth of just 1 percent in the quarter, so that is hurting,” Oberton said.
In contrast, sales of lower-margin non-fastener products grew 12 percent during the quarter.
Separately, officials said they expect to hire more salespeople and to open 55 to 60 new retail stores this year and 50 to 70 stores next year.
Besides stores, the company has orders to install 15,000 industrial vending machines at customer locations. The company had 20,000 such orders last year and 7,842 in 2011. This summer, Fastenal decided to slow the pace of vending machine installations to focus on quality over speed.