This Industrial Company’s Earnings Are Good News for the Economy

Coming into Monday trading, shares of industrial distributor Fastenal were up 20% year to date, and up 32% over the past 12 months. (Luke Sharrett/Bloomberg)

Industrial bellwether Fastenal reported better-than-expected second-quarter earnings along with solid sales growth. It’s a sign that the U.S. industrial economy is doing better.

On Monday, Fastenal reported second-quarter earnings per share of 29 cents on sales of $2.1 billion. Wall Street was looking for earnings per share of 28 cents on sales of $2.1 billion, according to FactSet. A year ago, Fastenal reported earnings per share of 26 cents—adjusted for a recent two-for-one stock split —on sales of just under $2 billion.

Operating-profit margins at 21% were a little better than expected, and up 0.6 percentage points year over year.

Fastenal stock rose 4.2% on Monday, closing at $45.07, while the S&P 500 added 0.1% and the Dow Jones Industrial Average rose 0.2%.

Investors look at the results from the industrial distributor to understand how the U.S. manufacturing economy is doing. Fastenal sells hundreds of thousands of products to thousands of customers.

The results look solid, but growth remains relatively slow. Sales growth has averaged about 4% a year for the past couple of years, about half the rate the company managed from 2019 to 2023.

A sluggish manufacturing economy is to blame. The Institute for Supply Management’s Purchasing Managers’ Index, or PMI, came in at 49 in June. A reading above 50 indicates growth. The June reading was the fourth consecutive reading below that level. The January reading was positive at 50.9, snapping a streak of 26 consecutive months below 50, after all revisions. (ISM revises readings once a year in January.)

Inflation, high interest rates, tariffs, and Covid-related supply-chain challenges have all weighed on industrial activity.

Things are looking a little better, however. Fastenal, which typically outpaces the industrial sector, showed second-quarter sales growth of almost 9% year over year, the best quarterly growth since early 2023. What’s more, average daily sales, a metric long published by the company, were up 9.8% in June.

“Bottom Line: [Sales] results were just slightly ahead of consensus expectations with manufacturing customers showing the most strength,” noted Jefferies analyst Stephen Volkmann in a Monday report. He rates Fastenal stock Hold.

Investors hope the trend of faster sales growth will continue.

Coming into Monday trading, Fastenal stock was up 20% year to date, and up 32% over the past 12 months.

Write to Al Root at allen.root@dowjones.com