Fastenal's third-quarter results exceeded Wall Street estimates, showcasing resilience in the face of sluggish demand within the industrial and construction supplies sectors. The company reported a net income of $0.52 per share for the quarter ended September 30, matching last year's performance but surpassing the consensus forecast of $0.51 from Capital IQ.
Additionally, Fastenal’s net sales increased by 3.5% year-over-year, totaling $1.91 billion, which slightly edged above Wall Street's estimate of $1.9 billion. In trading following the earnings announcement, Fastenal shares surged by 7.3%, showcasing investor confidence amid challenging market conditions. However, it is noteworthy that the daily sales rate of fasteners experienced a downturn, dropping by 4% during the quarter in contrast to a 2% decrease observed a year prior.
This drop correlated with a decline in original equipment manufacturing as well as maintenance, repair, and operations segments. Moreover, non-manufacturing end markets were not spared, recording a 1.5% decline due to downturns in nonresidential construction and reseller sectors. Chief Financial Officer Holden Lewis addressed these market challenges during the earnings conference call, stating, "The primary challenge remains sluggish end markets," while pointing out ongoing contraction in manufacturing activity as outlined in a Capital IQ transcript.
He continued on to mention that essential components for Fastenal, including machinery and fabricated metals, have shown weaker performance compared to overall indices, marked by a series of monthly declines. Despite these headwinds, Lewis reported a 1.9% increase in net daily sales for the third quarter, although this was partially offset by disruptions related to Hurricane Helene, which had an impact ranging between five to 25 basis points. The CFO noted a positive uptick in daily sales rates for September, which improved by 3.2% despite facing a negative impact from the hurricane and a moderation in growth within the warehousing end market.
He elaborated that mid-teen growth in this segment for September was notably reduced, compared to the growth rates experienced in July and August. In terms of growth drivers, Fastenal recorded higher unit sales, benefiting from larger customer engagements and the opening of on-site locations over the past two years.
Notably, the effect of product pricing on net revenue was reported as "not material," with Lewis stating, "Pricing was still slightly negative, though targeted pricing actions moderated the drag relative to the second quarter of 2024." Assuring stakeholders, Fastenal maintained its full-year outlook for net capital spending, forecasting between $235 million and $255 million, as indicated by Lewis during the call..