Minnesota's Fastenal says increased manufacturing, construction activity drove brisk 1Q results

Fastenal, the wholesale distributor of industrial supplies, reported strong first quarter results that may foreshadow a good quarter for other manufacturing and construction companies reporting later in the quarter.

Winona-based Fastenal attributed its sales increase to continued improvement in business activity.

"The first quarter of 2022 continued to experience strong, economically driven growth in underlying demand for manufacturing and construction equipment and supplies," the company said in its earnings release.

For the quarter Fastenal's earnings rose 28% to $269.6 million, or 47 cents a share, on revenue that grew 20% to $1.7 billion. Both beat expectations, as analysts were expecting 45 cents a share on revenue of $1.69 billion.

Fastenal is among the first companies to report quarterly results and as a supplier to manufacturing and construction companies offers a glimpse ahead in the quarterly earnings reporting cycle for key industries.

The company said pricing actions they took in the second half of 2021 and during the first quarter helped to offset inflationary pressures on transportation costs, fuel and products it distributes to customers.

Fastenal distributes fasteners, safety products and other products through its network of branch locations, Onsite locations and its FMI devices (Fastenal Managed Inventory) — which include scanned stocking locations, industrial vending machines and bins that hold bulk components managed through infrared, RFID and scaled bins.

Fastenal expects much of its future growth to come from its FMI Technology and Onsite locations (dedicated sales and service centers staffed by Fastenal but generally inside or adjacent to a customer location).

During the first quarter the company signed a record 106 new Onsite locations and are on pace in 2022 to meet their annual goal of signing 375 to 400 Onsite locations. The signings are a further signal to Fastenal that the business environment is normalizing.

Fastenal also said revenue through its FMI Technology was $610.5 million, up 48.4% from the first quarter of 2021.

Supply chain challenges still persist and the labor market remains tight but Fastenal CEO Dan Florness told analysts on the company's earnings call that conditions have stabilized and that he's heard anecdotally from his regional managers that they have been starting to see more applicants for positions with the company.

During the quarter, Fastenal achieved two important business milestones in March, announcing that its international business and e-commerce operations both exceeded $100 million in monthly revenue for the first time.

The company also announced that it would resume two important in-person company events.

For years public companies have been transitioning to virtual annual meetings and nearly every company held virtual annual meetings the past two years. Fastenal was one of the few to host a community event as part of the annual meeting prior to the pandemic but held virtual meetings the last two years.

On April 23, Fastenal will again host its annual meeting in person at Winona's Remlinger Muscle Car Museum where it expects a good local turnout. It will be the first time the company hosts the annual event at an off-campus site but is planning to give tours of its new office building.

On April 19 and 20, the company will hold its annual customer expo in person after hosting virtual events the previous two years. The expo showcases the range of solutions Fastenal offers its customers and this year focuses on Fastenal's supply chain solutions.

Fastenal's shares ended Wednesday up 2% to $58.98.