Continued weakness in the heavy equipment and construction markets contributed to slowing growth at industrial supplier Fastenal Co.
"This is not a great environment to do business in, but that's the world we live in," said president and CEO Dan Florness on the company's conference call with analysts. "But we will continue to focus on our growth drivers."
Fastenal Co., a distributor of fasteners and other industrial and construction supplies, reported third-quarter results Tuesday that slightly missed analysts' expectations. The Winona-based company reported earnings per share of 44 cents on revenue of $1.013 billion for the quarter ended Sept. 30. Analysts had expected earnings per share of 45 cents on sales of $1.014 billion.
Third-quarter earnings for Fastenal declined by 3 cents, or 6.4 percent, while sales increased 1.8 percent compared with last year's third quarter.
The company's results were generally impacted by a slow to no-growth industrial and manufacturing economy, which impacted its core fastener business.
Logan Purk, an analyst who covers Fastenal for Edward Jones, said it has been more of the same from Fastenal for the last three quarters.
"The business continues to show anemic growth, largely due to weakness in the industrial economy," Purk said.
Purk moved his recommendation from "buy" to "hold" after Fastenal reported second-quarter results in July. He maintained his "hold" rating Tuesday after noting that management wasn't particularly upbeat about calling a bottom to the industrial economy.
"The stock lacks a compelling catalyst to really drive shares higher," Purk said.
Fastener sales began to contract in the third quarter of 2015. The weakness continued, falling 2.9 percent in the third quarter compared with the same period last year.
Non-fastener sales, which are more resilient and are benefiting from Fastenal's push into more sales through industrial vending machines, also weakened in the last seven quarters. But non-fastener sales still improved to about 5 percent growth in each of the first three quarters of 2016.
Some of Fastenal's growth drivers have been the push into industrial vending machines and the growing number of OnSite stores, dedicated sales and service provided within a customer's facility.
The number of installed industrial vending machines continues to grow while the company has been selectively closing store locations that are either close to existing locations or are nearing the end of existing leases. The number of installed vending machines at the end of the third quarter was 60,400, up 12.8 percent from the third quarter of 2015. The number of store locations has decreased 2.5 percent in that same period to 2,545 stores.
Fastenal had a goal of signing 200 OnSite customer locations in 2016 and through the first three quarters the company signed 133 new OnSite locations 100 of which were already operating.
"I'm upbeat about our business as I look forward, a lot of good things from a momentum perspective," Florness said. "But it was a tough quarter."
Shares closed Tuesday at $39.96, down $2.16.