Fastenal Earnings: We Still Expect Sales and Earnings Growth in 2023, Despite Moderating Demand

Fastenal’s second-quarter earnings showed continued trends of moderating demand across end markets. However, these trends do not deter us from expecting Fastenal to post positive sales and earnings growth in 2023. Management commented during the earnings call that customers continue to be cautious with respect to the economic environment. For us, the read-through here is that demand is slowing, but not to the level of a protracted downturn. This gives us confidence to project roughly mid-single-digit sales and earnings growth for Fastenal this year, which is notable given the midteens sales and earnings growth in 2022. We made no changes to our discounted cash flow model, but our fair value estimate did tick up by $1 to $48 due to the time value of money since our last update.