Fastenal (FAST) is Poised Well: It's Time to Invest in the Stock

Fastenal Company's (FAST Quick QuoteFAST - Free Report) focus on e-commerce, cost-control efforts, and digitizing its business to bring efficiencies and solid performance from manufacturing and large accounts are expected to drive growth.Shares of this maker of industrial and construction fasteners have gained 17% this year, outperforming the industry's 0.6% rise. The Zacks Rank #2 (Buy) company's 2023 earnings estimates have moved upward to $1.98 per share from $1.94 over the past 60 days. The estimated figure indicates 4.8% year-over-year growth. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term.

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Focus on E-commerce: Fastenal has been focusing more on virtual platforms to boost customers’ engagement. The company's e-commerce business includes sales made through an electronic data interface with customers. During the first quarter of 2023, daily sales through e-commerce increased 48.7% year over year. Digital footprint (FMI technology plus non-FMI-related eCommerce) represented 54.1% of sales in the first quarter of 2023. In the year-ago period, the metric was 47%.Fastenal's goal is to hit 65% of sales in 2023, with the potential to hit 85% in the long term. It is to be noted that the company started calculating its Digital Footprint in first-quarter 2021, which includes sales through FASTVend, FASTBin and FASTStock, as well as e-commerce. Revenues attributable to eCommerce represented 21.9% of total first-quarter 2023 revenues.Cost-Saving Initiatives: FAST has been focusing on controlling costs to offset inflation, especially product and transportation costs. During the first quarter of 2023, FAST continues to manage operating expenses effectively, producing 90 basis points of operating expense leverage. The company leveraged employee costs, with slower growth resulting in lower incentive compensation. It also leveraged occupancy expenses as a result of branch rationalization.Higher Manufacturing Demand: The company has been gaining from solid demand for traditional large manufacturing and construction clients. The daily sales rate or DSR during first-quarter 2023 for the company's manufacturing market was 14.4%. Manufacturing and large accounts continue to perform strongly, reflecting investments in Onsite and changes to branch structure and sales roles.In first-quarter 2023, the company signed 89 new Onsite locations. As of Mar 31, 2023, the company had 1,674 active sites, up 16.3% from the comparable year-ago period. First-quarter 2023 daily sales through Onsite locations (excluding sales transferred from branches to new Onsites) increased 20% from a year ago. The increased number of onsite locations is likely to expand Fastenal's market share. The company expects 375-400 annual signings in 2023.Rewarding Shareholders: Fastenal has been driving investor value by providing regular dividends. The company began paying annual dividends in 1991 and semi-annual dividends in 2003. It then expanded to quarterly dividends in 2011. It paid $711.3 million worth of dividends in 2022 and $199.8 million in first-quarter 2023. The company keeps on raising quarterly dividends on a regular basis. In January 2023, Fastenal announced a 12.9% hike in its quarterly cash dividend. Over the past two decades, Fastenal has been paying out annual dividends. Also, it paid special one-time dividends in December 2008, December 2012 and December 2020.

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