FAST - Fastenal tilts lower after Q3 margin miss preparing for 'softer' 2023

Fastenal ( NASDAQ: FAST ) -2.1% in early trading Thursday after posting better than expected adjusted Q3 earnings but gross margin fell from Q2 and last year, and the company said it was preparing for a "softer" 2023.

Q3 net income improved to $284.6M, or $0.50/share, from $243.5M, or $0.42/share, in the prior-year quarter.

Fastenal's ( FAST ) cost of sales rose more than sales in the quarter, up 17% Y/Y to $976M while revenues rose 16% to $1.8B, as gross profit margin of 45.9% fell from 46.5 in Q2 and 46.3% in the year-ago quarter.

Inventories rose 10.1% to $1.68B in Q3 after rising 9.3% to $1.67B in Q2.

KeyBanc analyst Ken Newman said the lower gross margin reflects unfavorable product/customer mix, unfavorable price/cost, and inventory writeoff, partially offset by leverage of organizational costs, according to Bloomberg.

"Spot prices in the marketplace for many inputs, particularly fuel, transportation services, and steel, began to decline during the period. Due to our long supply chain for fasteners and certain non-fastener products, however it is likely to take several quarters before this is reflected in our cost of goods," the company said.

Fastenal's ( FAST ) results in Q2 were roughly in line with Wall Street consensus .

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