July 13, 2009 / 12:24 PM / 9 years ago

UPDATE 2-Fastenal Q2 results trail Street, shares drop

* Q2 EPS $0.29 vs est $0.33

* Rev down 21 pct

* Shares fall 8 percent (Recasts; adds details)

July 13 (Reuters) - Nuts and bolts distributor Fastenal Co (FAST.O) reported lower-than-expected quarterly results, hurt mainly by weaker sales at its industrial production business, sending its shares down 8 percent.

For the second quarter, net income was $43.5 million, or 29 cents a share, compared with $76.2 million, or 51 cents a share, a year ago.

Analysts on average were expecting earnings of 33 cents a share, before special items, according to Reuters Estimates.

Revenue fell 21 percent to $474.9 million, coming below analysts’ average expectation of $485.8 million.

Fastenal said the economic slowdown hit its non-residential construction business, that accounts for 20 percent to 25 percent of its sales.

The non-residential construction business contracted about 23 percent from year-ago levels, the company added.

Spending on U.S. non-residential construction projects like hotels and commercial space will fall more deeply this year and next than was thought likely six months ago, according to a semi-annual forecast by the American Institute of Architects. [ID:nN12469936]

“The downgraded outlook (for U.S. non-residential construction) for 2010 is not too surprising, as we had projected 2010 to represent the earliest possible non-residential trough,” Macquarie Research said in a note.

Though the stimulus package will cushion declines in institutional construction such as schools, hospitals and clinics, it will neither be large enough nor flow quickly enough to offset declines across the rest of the non-residential pie, the brokerage said.

Fastenal, a distributor of industrial and construction power tools, and equipment to construction, manufacturing and other industrial professionals, said its manufacturing customers shrunk about 28 percent in the second quarter.

The company, which stopped adding to its headcount except for store openings and for stores that were growing, however, said it plans to stabilize its total headcount at stores at its current level.

Fastenal competes with U.S. industrial distributors W.W. Grainger Inc (GWW.N) and Applied Industrial Technologies Inc (AIT.N). Shares of the Winona, Minnesota-based company fell $2.48 to $29.25 in early trade on Nasdaq. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Himani Sarkar)

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