Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Fastenal Company (FAST), MSC Industrial Direct Co Inc (MSM): Why Are These Industrial Stocks So Weak?

Page 1 of 2

Just when you thought it was safe to go back into industrial stocks, Fastenal Company (NASDAQ:FAST) and MSC Industrial Direct Co Inc (NYSE:MSM) delivered results that raised more questions than answers. Both companies were downbeat and went to lengths to describe how their businesses weren’t performing in line with the headline manufacturing ISM numbers. So what is going on, and what is the read across from these earnings?

ISM Not Relevant Anymore to Fastenal?

Fastenal Earnings ReportTraditionally the manufacturing ISM numbers have guided the industry’s performance, and even more so when it comes to the industrial suppliers. Indeed, the theory (at least mine) was that the stronger numbers in the first quarter would lead to a resumption of growth in the industry. Well, according to Fastenal Company (NASDAQ:FAST) and MSC Industrial Direct Co Inc (NYSE:MSM), that was not the case!

Here are the headline PMI and New Orders numbers from the ISM.

Starting with Fastenal Company (NASDAQ:FAST), it declared that its sales growth was a ‘struggle’ in the quarter and conditions continued to slow down. This sort of commentary is not congruent with the ISM numbers, and its management even suggested that its performance wasn’t as correlated with the index as previously thought.

The bad news didn’t stop there, as its vending machine signings were lower than expected. In addition it had planned for 65-80 new stores for 2013 but announced that it expected to be at the lower end of the range in 2013. Although the company declared that it would still invest, even in a slowdown, it wouldn’t surprise me if it reined in some expansion plans if slow growth continues.

To put Fastenal Company (NASDAQ:FAST)’s report in the context of its longer term plans I would recommend going over this article. In terms of its long term ‘pathway to profit,’ it is obvious that all the objectives are somewhat reliant on sales growth. Unfortunately this is something that has been slowing for Fastenal in recent quarters.

The problem appears to be in its fastener sales, and this is usually an indication of broad based weakness.The one bright spot was its metalwork products, which grew at above the company rate. I’ll come back to this point later.

MSC Weak Too

It was a difficult quarter for MSC Industrial Direct Co Inc (NYSE:MSM) too. Having previously announced that its end markets were in a holding pattern, which had descended into ‘paralysis’ in December, it was reasonable to expect better things this quarter. However, the company declared that the latest weak ISM number for March were more in line with what it was seeing in its current trading conditions. Indeed, it reiterated what Fastenal Company (NASDAQ:FAST) said about sequential weakness in the quarter with January being relatively strong leading into a weaker February and March.

Page 1 of 2
Loading Comments...