It’s been a good week for Fastenal Company (NASDAQ:FAST) shareholders, because the company has just released its latest annual results, and the shares gained 7.1% to US$37.35. Fastenal reported in line with analyst predictions, delivering revenues of US$5.3b and statutory earnings per share of US$1.38, suggesting the business is executing well and in line with its plan. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Fastenal’s 16 analysts are now forecasting revenues of US$5.62b in 2020. This would be a reasonable 5.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to accumulate 4.3% to US$1.44. In the lead-up to this report, analysts had been modelling revenues of US$5.61b and earnings per share (EPS) of US$1.44 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of US$36.00, showing that the business is executing well and in line with expectations. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Fastenal analyst has a price target of US$43.00 per share, while the most pessimistic values it at US$30.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Fastenal shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Fastenal’s past performance and to peers in the same market. It’s pretty clear that analysts expect Fastenal’s revenue growth will slow down substantially, with revenues next year expected to grow 5.4%, compared to a historical growth rate of 7.8% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.5% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Fastenal to grow at about the same rate as the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to come to a conclusion on Fastenal. Long-term earnings power is much more important than next year’s profits. We have forecasts for Fastenal going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Fastenal’s balance sheet, and whether we think Fastenal is carrying too much debt, for free on our platform here.
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