Fastenal Company

Fastenal had a disappointing second quarter of 2023 as it failed to meet the revenue expectations of analysts despite a 5.9% increase in daily sales. Its overall business activity has moderated since March, culminating in June with a 4.7% daily sales growth. Notably, the manufacturing segment showed significant growth at 10.4% despite challenging market conditions. Investments in Onsite and key account planned spend contributed to this growth. However, weaker sequential in May and June reflected a macro-driven change. Pricing trends also contributed to growth, but it is expected to continue declining in the second half of 2023. Other factors, such as weakness among some large retailers, lack of growth in the rest of the world, and contraction in the construction market, remained ongoing challenges. With a focus on cost control and strategic flexibility in inventory, the company’s management team aims to navigate the near-term uncertainties and capitalize on opportunities as the industrial cycle improves. We give Fastenal Company a ‘Hold’ rating with a revised target price.