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- FAST 3Q25 - EPS miss due to Industrial slowness. What's next? Bull case $62. Bear case $32
FAST 3Q25 - EPS miss due to Industrial slowness. What's next? Bull case $62. Bear case $32
Cheat Sheets presented by stocktwits
FASTENAL COMPANY (FAST)
🔩 Industrial Supply Leader | Rev +12% to $2.13B, Digital 61%, Operating Margin 21%
Q3 2025: Building Amazon of Industrial Supplies | 58 Years of Dividend Growth
💰 Market Cap: $49.9B | 🏢 Employees: 23,700 | 🌍 3,500+ Locations
👨💼 CEO Dan Florness | 🎯 Industrial Distribution | 💎 58 Years Old (Founded 1967)
$43.35
📉 -$2.43 (-5.31%) Today
+30% YTD
Price Target Scenarios
18-Month Horizon (Mid-2027 Targets) - Based on Current Price $43.35
$62.00
Bull Case (+43%)
Industrial Recovery
Margin Expansion
📊 Valuation:
2027E Revenue: $9.5B × 4.0x EV/Sales = $62/share
🚀 What's Needed:
Industrial recovery • Sales growth 15%+ • Digital 70%+ • 2,500+ Onsite locations • Gross margin 46%+ • Operating margin 23% • FMI 30K+ devices/year • Market rerates to 4x sales
$52.00
Base Case (+20%)
Steady Growth
Market Inline
📊 Valuation:
2027E Revenue: $9.2B × 3.5x EV/Sales = $52/share
⚖️ What's Needed:
Sales growth 8-10% • Digital 65-68% • 2,200+ Onsites • Gross margin ~45% • Operating margin 20-21% • FMI 28-30K devices/year • Industrial stays flat • Market values at 3.5x sales (historical avg)
$32.00
Bear Case (-26%)
Industrial Recession
Margin Pressure
📊 Valuation:
2027E Revenue: $8.0B × 2.5x EV/Sales = $32/share
🔻 What Could Go Wrong:
Manufacturing recession • PMI stays sub-50 • Sales growth 2-4% or negative • Pricing pressure • Gross margin 43-44% • Operating margin 18-19% • Amazon competition intensifies • Onsite growth stalls • Tariffs spike costs • FCF declines • Market derates to 2.5x sales
Bottom Line for Retail Investors
🏆
Margins EXPANDED (Not Compressed)
Gross margin UP 40bps to 45.3%. Operating margin UP 40bps to 20.7%. Bears said margins would crater - WRONG. Fastener Expansion driving margin lift. Better product mix. Strategic inventory buys paying off. President Jeff Watts: "Double digit top line AND faster bottom line growth with margins expanding." This is execution.
💎
FMI Sales Growing DOUBLE Company Rate
FMI daily sales grew 18% YoY - 600bps FASTER than company's 11.7% growth. 134K devices installed (up 8.7%). Averaging 110 device signings PER DAY. FMI now 45.3% of sales. Digital footprint = 61.3% total. Once machines are in, customers DON'T LEAVE. This is the moat. Amazon Business can't replicate vending at point of use.
📈
All Self-Help In Flat Market
PMI averaged 48.6 (contraction). Industrial economy "flat" per CEO. Growth was "mostly self-help and market share gains." Pricing = 2.4-2.7%, rest was volume gains. National accounts up double digits. Sites spending $50K+/month grew 15.4%. Non-traditional markets (healthcare, government, warehousing) growing strong. Taking share in a WEAK market = quality.
⚠️
Price Fatigue + Customer Paralysis
CEO Dan: "Price fatigue is REAL." Lowered Q4 pricing from 5-8% to 3.5-5.5%. Delayed Q3 pricing 30 days for better talks. Customers "doing what they need but NOT doing MORE. Not building for future." Tariff uncertainty = paralysis. SG&A jumped (bonus reset). Stock at $43.35 down sharp. If manufacturing recession hits, this gets ugly. Not for weak hands.
📊 What Just Happened: Double-Digit Growth, Self-Help Story, CEO Says "We've Turned a Corner"
Revenue Up 11.7% to $2.13B (2nd Quarter Above $2B) • EPS $0.29 (+12.3% YoY) • Net Income +12.6% • Digital Footprint Hit 61.3% • FMI Sales Growing 18% • Operating Margin 20.7% (+40bps) • Gross Margin 45.3% (+40bps) • PMI Averaged 48.6 (Still Contraction) • Growth All Self-Help & Market Share Gains 💪
💰
$2.13B
Q3 2025 Revenue
+11.7% YoY
⚡
61.3%
Digital Footprint
FMI +18% YoY
🎯
$0.29
EPS Q3
+12.3% YoY
🚀
134K
FMI Devices
+8.7% YoY
📞 Key Q3 2025 Earnings Call Highlights
🎊
Second Quarter Above $2B, Margins EXPANDED
Rev $2.13B (up 11.7%). Gross margin UP 40bps to 45.3%. Operating margin UP 40bps to 20.7%. EPS $0.29 up 12.3%. CEO Dan: "10 years ago sales went negative, we needed to regroup. Now two great quarters above $2B." PMI 48.6 (contraction) but growth all self-help. Pricing 2.4-2.7%, rest volume/share gains.
🚨
FMI Sales Growing 18% - Way Above Company Average
110 FMI device signings PER DAY. 134K devices total (up 8.7%). KEY STAT: FMI daily sales grew 18% YoY - way above 11.7% company avg. FMI now 45.3% of sales (vs 43% last year). Digital Footprint = 61.3%. E-business grew 8% (relaunching platform 2026). This is the moat - integration = stickiness.
💎
Large Customer Strategy WORKING
Sites $10K+/month grew 8.1%. Sites $50K+/month grew 15.4% - MASSIVE. National accounts up double digits. Example: Texas manufacturer, 20yr customer, expanded Fastenal from 2 sites to 5 nationally as primary supplier. Non-traditional markets (healthcare, gov, warehousing) growing significantly - less cyclical than manufacturing.
🔬
Fastener Expansion = Game Changer
Fastener sales grew 15% in Sept - OUTPACING company. Better DC availability, aligned teams, easier for customers. Result: faster growth AND margin lift. NEW breakdown: 38.8% direct/OEM (cyclical, tied to PMI), 61.2% indirect/MRO (less cyclical). Dan: "Six months ago I'd have said OEM was 30%. I was wrong."
📍 CEO Dan - "We've Turned a Corner": Reflected on 10 years: "Q3 2015, became CEO, sales went negative. Now two great quarters above $2B." Delayed Q3 pricing 30 days for better customer talks. "When you push too fast, you cede territory. 30 days later with more insight, you're more effective." On pricing: "Price fatigue is real. Biggest complexity: ARE prices done resetting so customers can decide." Q4 guidance: 3.5-5.5% (down from 5-8%).
🌍 Customer Paralysis: "Customers doing what they need but NOT doing MORE. Not building for future because uncertain on costs." Tariff uncertainty = decision paralysis. "You ask ten economists, get 12 opinions. Political will to calm this down, but mixed signals."
💰 Inventory Strategy: "Got too tight on inventory, lost share. Brought back standard inventory, INCREASED it." Returns are ACCRETIVE to ROIC - better than company avg. "When you buy orderly, you purchase better. It's about RETURNS, not percentages." Operating cash $386.9M (115% of net income).
🔮 Team Shoutouts: Bill Drazkowski (national accounts), Tony Boersma (supply chain gave tariff wiggle room), Jeff Watts (aligned sales). SGA up from bonus reset: "$8K/month per district manager - they earned it. Finding success and paying for it."
🚀 Why FAST Bulls Are Right
💎
Margins Expanding NOT Compressing
Gross margin UP 40bps to 45.3%. Operating margin UP 40bps to 20.7%. Net income +12.6%, EPS +12.3% - FASTER than revenue. Fastener Expansion driving lift. CFO targeting flat gross margin 2025 = HUGE win in tariff chaos. Bears wrong on margin compression.
⚡
FMI Growing 18% = 60% Faster Than Company
FMI daily sales +18% vs 11.7% company - PROOF digital moat works. 134K devices (+8.7%). 110 signings/day. FMI 45.3% of sales. Digital footprint 61.3%. Stickiest revenue in industrial - switching costs astronomical. Amazon can't replicate point-of-use integration. E-commerce relaunch 2026.
👑
Taking Share In FLAT Market
PMI 48.6 (contraction). Economy "flat." ALL growth = self-help/share gains. National accounts up double digits. Sites $50K+/month +15.4%. Texas manufacturer expanded from 2 to 5 sites. Non-traditional markets growing strong. Winning share in DOWN market. When PMI goes positive = massive acceleration.
🚀
Management Executing At Highest Level
Dan: "10 years ago became CEO, sales negative. Now two quarters above $2B." Team aligned: Drazkowski (national accounts), Boersma (supply chain), Watts (sales). Strategic inventory ACCRETIVE to ROIC. Op cash $386.9M (115% of net income). Generating cash AND deploying smart. Macro turn = 15-20% growth possible. Rerate to $60-70.
🐻 Why FAST Bears Have Valid Concerns
📉
Price Fatigue = Growth Stalling Risk
Dan: "Price fatigue REAL." Q4 pricing cut to 3.5-5.5% from 5-8%. Delayed Q3 pricing 30 days - talks were tough. If pricing stalls at 3.5% but costs +5% = 150bps margin hit. CFO warned Q4 margin squeeze possible. At 20x P/E, any miss = 10-15% drop.
🏥
Customer Paralysis From Tariff Chaos
Dan: "Customers doing what they need but NOT MORE. Not building for future - unsure on costs. You get a pause." PMI 48.6. If tariff chaos extends into 2026, customers paralyzed, capex deferred, growth stalls. Taking share of SHRINKING market. Growth could drop to 5% or go NEGATIVE like 2015-16.
💸
SG&A Bloat From Bonus Resets
SGA jumped Q3. Bonus reset: "$8K/month per district manager - two years of pressure." Employee costs rising faster than sales. Continues into Q4/Q1 2026. If growth slows to 5-7% but SGA grows 10-11%, op margin falls to 18-19%. Inventory +10.5%, AR +12.2%. If turns slow, cash suffers.
⚠️
Stock Priced For Perfection At $45.78
Trading at $43.35 after sharp decline from all-time high of $50.63. Market cap $49.8B. That's 20x forward P/E on what's essentially a 10-12% grower. Analyst consensus: HOLD with avg price target $44-47 (ABOVE current price after drop). High target $53 = 22% upside. Low target $38-41 = 12-16% downside. Dan reflected on 2015 when he became CEO: "Sales went negative, we needed to regroup." If manufacturing enters recession and PMI stays sub-50 for 12+ months, this stock trades at 15x = $30-35. History says industrial distributors get DESTROYED in recessions. Recent 5% drop shows market getting nervous.
This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.
