Fastenal Co. said it ended its third quarter with a surge, reporting daily sales grew at the fastest pace in nearly three years.
Sales for the quarter ended Sept. 30 rose 11.8 percent over the same period a year ago, to $1.13 billion.
Earnings for the Winona-based distributor of industrial and construction supplies were $143.1 million, or 50 cents a share, up 13 percent from last year.
The sales increase was driven by improved markets and additions to company's industrial vending and Onsite locations, which are the company's growth drivers.
"The third quarter of 2017 ended with September daily sales growing 15.3 percent. We have not seen daily sales growth above 15 percent for almost three years," said Dan Florness, president and chief executive, in the company's earnings release. "Our growth drivers, combined with a solid economy, are resulting in great growth."
Fastenal signed 4,771 industrial vending machines in the quarter and said sales through the vending machines continued to grow at a double-digit pace. It also signed 81 new Onsite locations for the quarter, compared with 41 signings in the same period last year.
Sales slightly exceeded analyst expectations, and earnings of 50 cents per share matched the consensus of 15 analysts following the company, according to Thomson Reuters.
Results may have been stronger but for employee-related costs that increased 12.3 percent in the quarter. Those costs included higher bonuses and commissions, increased health care costs and a modest increase in employees, including additions from Manufacturers Supply Co., which was acquired this spring.
The company's gross profit as a percentage of net sales decreased 20 basis points from the third quarter of 2016 due in part to effects of hurricanes in Texas, Florida and the Caribbean.
Elizabeth Vermillion, an equity analyst for CFRA Research, thinks third-quarter concerns on margins may be short-lived. She maintained her "buy" opinion.
"Q3 gross margin pressures are unlikely to continue in the coming quarters," she wrote in a research note. "Vending and construction site signings demonstrate a strengthening demand environment, which we see continuing through 2018."
Shares of Fastenal closed at $44.51 per share, down 0.8 percent Wednesday. Shares are down 5.3 percent for the year. Shares in the past year have traded between $37.70 and $52.74 cents per share.