Should you buy? The recent slump in the industrial sector, caused by weak oil prices and the strong U.S. dollar has hampered Fastenal's growth. But shares and expected earnings are strong, and the company pays a dividend with a 2.5% yield at the current stock price.
For the quarter analysts, on average, expect Fastenal to earn 45 cents per share on revenue of $988.85 million, up 4.6% and 3.7%, respectively, from a year ago. For the year, earnings are projected to climb 4.5% over last year to $1.85 per share, while revenue of $4.02 billion would mark an increase of 4% from the year-ago quarter.
At $47.50, shares have surged 16% for the year to date and 17% for the past 52 weeks. By contrast, the iShares U.S. Industrials ETF (IYJ - Get Report) that tracks the industry is up 3.8% and down 1.4% for the same period.
The analyst consensus appears to be that Fastenal's outperformance will continue. Fastenal's earnings-per-share estimate for both the just-ended quarter and full year have risen by 1 cent. Analysts expect 2017 earnings up by more than 8%.
Why is that important? It would mark a growth acceleration rate of almost 50 percentage points from 2016 earnings growth estimates for 4.5%. This confidence comes despite tepid earnings results just released from rival MSC Industrial Supply (MSM - Get Report) , suggesting Fastenal is seeing solid pricing power.
Weakness in the industrial sector may persist in the near term, so investors should buy the stock, hold it for the next 12 to 18 months, collect the dividend and expect total shareholder returns of 15% to 20%.