FAST

It's always fascinating to hear what industrial supply companies like Fastenal (NASDAQ: FAST) say about the economy and trends in their end markets. Their sales are relatively short-cycle, meaning there's a very short period between when a customer sees an increase in demand and when they use or order Fastenal's industrial fasteners, safety products, and a wide range of industrial products. That makes them ideal barometers of current market conditions and gives investors a great early read on earnings season. Missed AI's "Act 1"? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue » This continues to be a year of recovery for the U.S. manufacturing sector, with the Institute for Supply Management's Purchasing Managers' Index (PMI) indicating solid expansion every month this year, having spent the 2023 to 2025 period almost entirely in contraction in the U.S. That recovery was further confirmed in Fastenal's results: - Daily sales growth in heavy manufacturing (Fastenal's core end market) grew 20.2% year over year. - Daily sales growth in all other manufacturing grew by 13.2%. - Daily sales growth in all other end markets grew by 12.3 %. However, it's important to dig deeper into the source of the strength, and there's some critical information here for the upcoming earnings season. Based on what Fastenal's management said on its third-quarter earnings call, you can generally put these sectors into three buckets. In the first bucket, strong end markets include machined products, aerospace, and industrial equipment, according to CFO Max Tunnicliffll. He also noted, "Growth opportunities were strongest in data centers." The second bucket contains end markets with more balanced conditions. Nonresidential construction continued to grow, and construction growth overall "remains healthy," according to CEO Jeffery Watts. Still, growth did slow down from an unusually strong second quarter -- something to look out for when construction-related stocks report. In addition, traditional manufacturing and automotive are relatively weaker than the heavy manufacturing groups in the first bucket. Finally, the third bucket contains some relatively weak areas, such as agriculture and food. Overall, this is a bullish report from Fastenal, indicating broad-based strength in the industrial sector heading into the end of the year. If aerospace, data center construction, machine parts, and industrial equipment customers are ramping orders from Fastenal, it's because they continue to strengthen in end demand, and that indicates that companies like GE Aerospace and RTX in aerospace, Illinois Tool Works and Rockwell Automation in industrial equipment, and Comfort Systems USA in data center mechanical and electrical contracting will report good quarters. Before you buy stock in Fastenal, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fastenal wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $380,363!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,315,732!* Now, it's worth noting Stock Advisor's total average return is 919% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of October 18, 2026. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA, Fastenal, GE Aerospace, and RTX. The Motley Fool recommends Illinois Tool Works and Rockwell Automation. The Motley Fool has a disclosure policy. Data Centers, Aerospace, and Machined Parts: This Company's Earnings Just Made the Bull Case for U.S. Industrials was originally published by The Motley Fool

Fastenal came into this Q3 2026 report priced for excellence, trading on a rich 40.8x trailing P/E after a solid 12‑month run. The stock still slipped about 3% in the first full session after the release, which suggests expectations were high and patience was thin. The headline is simple. Fastenal delivered another quarter of strong profit momentum, with Q3 basic earnings per share at US$0.35 on revenue of US$2.46b and a trailing net margin of 15.6%. While the market focused on the premium valuation, the results themselves highlight one thing that really matters here: margin power. Impressed by Fastenal's margin strength but uneasy about paying a premium 40.8x P/E for it? Check out list of solid balance sheet and fundamentals stocks (25 results). - Revenue (Q3 2026 vs. Q3 2025): US$2,463.3m vs. US$2,133.3m (up about 15.5%) - Net Income (Q3 2026 vs. Q3 2025): US$401.6m vs. US$335.5m (up about 19.7%) - Basic EPS (Q3 2026 vs. Q3 2025): US$0.35 vs. US$0.29 (up about 19.8%) - Operating Margin (Q3 2026 vs. Q3 2025): 21.5% vs. about 20.6% (up about 0.9 percentage points) Ask Charlie which Fastenal margin gains look repeatable next quarter. The bullish view hinges on Fastenal turning embedded relationships and digital tools into higher profitability and returns over time. "Some analysts expect Fastenal to keep building its embedded supply chain partnerships, digital footprint, and managed inventory programs, with the goal of supporting higher operating margins and returns on invested capital over time." Q3 results hit several of those checkpoints. Contract customers now generate over 76% of sales, onsite sites spending at least US$50k a month grew roughly 19%, and digital channels reached 61.4% of revenue. That mix helped lift operating margin to 21.5% and pushed return on invested capital to 32.5%, which suggests the model is starting to do what the thesis asks. One Narrative disagrees with today's price. → See where this Narrative says Fastenal should trade. The cautious view argues that Fastenal's growth engines may not fully overcome cost and investment friction. "Even though Fastenal has held operating margin roughly flat through SG&A leverage, management's view that price and cost neutrality is unlikely to be restored in the near term means persistent tariff and transportation headwinds could outpace further efficiency gains, which risks erosion in future gross margin and earnings growth." Q3 supports part of that worry. Gross margin slipped about 40 bps, with roughly 30 bps still tied to price and cost pressure even after tariff refunds. Mix into large accounts weighed a further 50 bps. Operating margin expanded to 21.5% because SG&A ratios improved, so the burden of offsetting tariffs and freight remains firmly on efficiency rather than pricing power. Fastenal reports show how operational discipline and valuation can leave limited room for fresh optimism. The real opportunity could sit in stocks where fundamentals and valuation have not yet fully aligned. - Company 1 - 49% below our estimate - expands silver and gold output as new projects ramp and link production to electrification demand. - Company 2 - 46% below our estimate - integrates a major bank merger while maintaining a relationship-focused model that aims to deepen fee and lending activity. - Company 3 - 38% below our estimate - scales device trade-in programs supported by policy and applies refurbishment technology to increase margin on used electronics. That is three of the list. See every one of the 32 undervalued companies on it → This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include FAST. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Fastenal (FAST) came out with quarterly earnings of $0.35 per share, beating the Zacks Consensus Estimate of $0.34 per share. This compares to earnings of $0.29 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.94%. A quarter ago, it was expected that this maker of industrial and construction fasteners would post earnings of $0.33 per share when it actually produced earnings of $0.33, delivering no surprise. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Fastenal, which belongs to the Zacks Industrial Services industry, posted revenues of $2.46 billion for the quarter ended September 2026, missing the Zacks Consensus Estimate by 0.95%. This compares to year-ago revenues of $2.13 billion. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Fastenal shares have added about 28.2% since the beginning of the year versus the S&P 500's gain of 14%. While Fastenal has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Fastenal was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.31 on $2.38 billion in revenues for the coming quarter and $1.26 on $9.3 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Industrial Services is currently in the top 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. ClearSign Technologies (CLIR), another stock in the same industry, has yet to report results for the quarter ended September 2026. This combustion systems technology company is expected to post quarterly loss of $0.20 per share in its upcoming report, which represents a year-over-year change of +33.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. ClearSign Technologies' revenues are expected to be $0.88 million, down 15.1% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastenal Company (FAST) : Free Stock Analysis Report ClearSign Technologies Corporation (CLIR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Fastenal Company FAST reported mixed third-quarter 2026 results, with earnings beating the Zacks Consensus Estimate and net sales missing the same. Year over year, however, both metrics grew notably. Customer contract wins and pricing actions supported growth, while expense leverage helped offset pressure from sales to larger accounts. Contract customer daily sales rose 18.8%, and operating margin expanded 90 basis points (bps) to 21.5%. FAST stock lost 6.2% during today's pre-market trading session after the announcement of the financial results. Fastenal's quarterly earnings of 35 cents per share surpassed the Zacks Consensus Estimate by 2.9% and increased 19.8% year over year from 29 cents per share. Net sales rose 15.5% year over year to $2.46 billion but missed the consensus mark of $2.49 billion by 1%. Fastenal Company price-consensus-eps-surprise-chart | Fastenal Company Quote Sales benefited from customer contracts signed since the first quarter of 2024 and a modest improvement in industrial production. Product pricing added approximately 240 bps to third-quarter sales growth. Currency movements created a roughly 10-bps headwind. Contract customers accounted for 76.5% of revenues, up from 73.8% a year earlier. Non-contract daily sales increased 7.8%. The number of contracts rose 6.4% to 3,744, with signings weighted toward national multi-site accounts. Average customer sites generating at least $50,000 in monthly sales increased to 3,288 from 2,771. Sales from those sites grew 27.6% to $1.46 billion, highlighting the concentration of growth among larger customers. Manufacturing contributed 76.6% of quarterly revenues, with daily sales rising 17.2%. Heavy manufacturing increased 20.2% and accounted for 44.6% of revenues, benefiting from key accounts in aerospace, machined products and industrial equipment. Other manufacturing daily sales advanced 13.2%. Non-residential construction daily sales grew 12%, marking the sixth consecutive quarter of growth. Other end markets advanced 12.4%, helped by transportation and reseller customers. Total non-manufacturing daily sales increased 12.3%. Direct material daily sales rose 18.6%, outpacing the 14.3% growth in indirect materials. Direct cutting tools and abrasives gained 19.5%, while direct non-fasteners and hardware increased 21.2%. Digital Footprint sales increased 16.1% to $1.54 billion and represented 61.4% of revenues compared with 61.3% a year ago. This measure includes sales through Fastenal Managed Inventory (FMI) technology and eBusiness transactions excluding overlapping orders. FMI sales grew 14.6% to $1.12 billion, while eBusiness sales climbed 14.8% to $721.5 million. FASTBin and FASTVend sales increased 17.6% to $827.2 million, outpacing overall company growth. Fastenal signed 7,484 weighted FASTBin and FASTVend machine-equivalent units (MEUs), up 6.2%. The installed base reached 143,878 MEUs, up 7.4%, reinforcing its emphasis on automated inventory management. Gross profit rose 14.4% to $1.1 billion, but gross margin declined approximately 40 bps to 44.8%. A mix shift toward large customers reduced gross margin by about 50 bps, while pricing relative to costs exerted a roughly 30-bps drag. That price-cost headwind narrowed about 10 bps from the preceding quarter. Sourcing savings, supplier rebates and tariff refunds provided relief. SG&A expenses increased 9.4% to $573.9 million, below revenue growth. As a share of sales, SG&A improved 130 bps to 23.3%, supported by labor productivity and fixed-cost leverage. Operating income climbed 20.2% to $530.8 million, while net income increased 19.7% to $401.6 million. Operating cash flow increased 9% year over year to $421.6 million, equaling 105% of net income compared with 115.3% a year ago. Higher receivables and inventory requirements absorbed cash as sales expanded. Year over year, accounts receivable increased 19.9%, inventories rose 3.1% and accounts payable advanced 29.3%. Free cash flow, a non-GAAP measure, totaled $349.6 million compared with $332.1 million a year earlier. It represented 87.1% of net income, down from 99%. The company returned $328.4 million to shareholders through $298.2 million in dividends and $30.2 million in repurchases. Total debt ended the quarter at $100 million, down from $195 million a year ago. Fastenal maintained its fiscal 2026 net capital investment expectation of $310-$330 million compared with $230.6 million in 2025. Spending priorities include replacing the Atlanta hub, improving distribution efficiency, completing delayed IT projects and adding trucking capacity. The company expects an ongoing tax rate of approximately 24.6%, absent discrete tax items or changes to tax law. Fastenal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Here are some companies from the Industrial Products sector, which according to our model, have the right combination of elements to post an earnings beat in their respective quarters to be reported. Eaton Corporation plc ETN has an Earnings ESP of +0.53% and a Zacks Rank of 2. Eaton's earnings topped the consensus mark in three of the last four quarters and met on the remaining occasion, with the average surprise being 1.3%. Earnings for the company's third quarter of 2026 are expected to grow 15% year over year. Kennametal Inc. KMT has an Earnings ESP of +1.50% and a Zacks Rank of 3. Kennametal's earnings topped the consensus mark in each of the last four quarters, with the average surprise being 29.3%. Earnings for the company's third quarter of 2026 are expected to surge a whopping 682.4% year over year. Watsco, Inc. WSO has an Earnings ESP of +0.19% and a Zacks Rank of 3. Watsco's earnings topped the consensus mark in one of the last four quarters and missed on the remaining three occasions, with the average negative surprise being 4.9%. Earnings for the company's third quarter of 2026 are expected to improve 3.8% year over year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastenal Company (FAST) : Free Stock Analysis Report Eaton Corporation, PLC (ETN) : Free Stock Analysis Report Watsco, Inc. (WSO) : Free Stock Analysis Report Kennametal Inc. (KMT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

- Interested in Fastenal Company? Here are five stocks we like better. - Fastenal delivered strong Q3 growth: Sales rose 15.5% to $2.46 billion, while operating income and EPS increased about 20%. Operating margin expanded 90 basis points to 21.5%, supported by market-share gains and SG&A leverage. - Large accounts and technology-enabled services drove momentum: Sales from customer sites spending at least $50,000 monthly increased about 28%, while contract customers generated more than 76% of sales. Digital sales grew roughly 16%, and the FASTBin installed base surpassed 143,000 units. - Management expects continued productivity gains but less pricing support: Pricing contributed 2.4 percentage points to growth and is expected to become a smaller tailwind. Fastenal maintained its $310 million–$330 million capital-spending outlook and returned $328 million to shareholders during the quarter. - MarketBeat Week in Review – 07/13- 07/17 Fastenal (NASDAQ:FAST) reported third-quarter 2026 sales growth of 15.5% and operating-margin expansion, as the industrial distributor cited market-share gains with larger customers, new contract wins and increased use of technology-enabled supply-chain services. Net sales reached $2.46 billion, an increase of $330 million from a year earlier. Operating income increased $90 million year over year, which President and CEO Jeff Watts said was the largest single-quarter year-over-year increase in the company's history. Operating margin rose 90 basis points to 21.5%, while operating earnings and earnings per share each grew by roughly 20%. → 5 Retail Picks to Watch as the Holiday Shopping Season Nears - Why Fastenal's Latest Drop Could Be Its Biggest Opportunity Yet Fastenal's trailing 12-month return on invested capital increased 230 basis points to 32.5%, compared with a 10-year average of about 28%, according to Chief Financial Officer Max Tunniclff. Watts said the quarter's results reflected accelerated growth, improved conversion of sales into profit, and market-share gains tied to the company's key-account strategy. Fastenal's contract count increased 6.4% from the prior year, with new signings weighted toward multi-site national accounts. → Insider Buying Signals Opportunity in H.B. Fuller, FocalTherics, Cardinal - Fastenal Stock Slips After Earnings: 5 Reasons To Buy the Dip The number of customer sites spending at least $50,000 per month rose nearly 19%, to roughly 3,300 from approximately 2,800 a year earlier. Sales from those sites increased about 28%. Contract customers represented more than 76% of sales, and their daily sales increased 18.8%. Pricing contributed approximately 2.4 percentage points to third-quarter growth, a slower contribution than earlier in the year as the company began lapping stronger pricing actions from 2025. Watts said industrial market conditions improved during the first half and continued to improve in the third quarter, though Fastenal's growth exceeded the markets it serves. → Broadcom's Anthropic Bet Gets Bigger as $60 Billion Financing Raises the Stakes Tunniclff said daily sales growth improved to 15.5% from 14.7% in the second quarter. Heavy manufacturing, which represented about 45% of sales, posted approximately 20% daily sales growth. Growth was particularly strong in key accounts, machined products, aerospace and industrial equipment. Other manufacturing grew about 13%. Direct-material sales increased approximately 19%, outpacing roughly 14% growth in indirect materials. Electrical, tools and other industrial products also grew faster than the company overall. Management said data centers were a meaningful contributor to sales growth. Watts estimated that data-center-related activity accounted for roughly 4 to 5 percentage points of growth, though he said it was difficult to precisely measure because the company serves the market through a range of existing customer relationships, including construction contractors and manufacturers. Digital sales accounted for 61.4% of total sales and grew approximately 16% on a daily basis. Fastenal signed about 7,500 weighted FMI, or Fastenal Managed Inventory, devices during the quarter, equivalent to about 117 per day, compared with 110 per day a year earlier. The company's installed base exceeded 143,000 units, up 7% year over year, and sales through FASTBin increased approximately 18%. Fastenal continues to expect 27,000 to 29,000 weighted device signings for the full year. Watts described an example of a new customer that had experienced direct-material stock-outs, supply-chain shortages and limited visibility into product consumption. Fastenal reorganized storage areas, deployed bar-coded bins and FMI technology, created planograms and connected the customer to its FAST360° system. The company said the project increased digital visibility from zero to 99%, eliminated stock-outs and reduced inventory, with expected long-term overall cost savings of 25% to 30%. Third-quarter gross margin was approximately 45%, down 40 basis points from a year earlier but up 20 basis points sequentially. Customer mix was the primary year-over-year headwind, reducing gross margin by approximately 50 basis points as larger customers generally carry lower gross margins despite supporting attractive operating margins through volume and service efficiency. Price-cost dynamics created an approximately 30-basis-point headwind, though that was 10 basis points better than in the second quarter. Favorable items added about 40 basis points to gross margin, including direct-sourcing savings, supplier rebates and tariff refunds. Tunniclff said roughly half of that benefit reflected timing and should not be assumed to continue in the underlying run rate. SG&A leverage more than offset the gross-margin decline. SG&A expenses benefited from 130 basis points of leverage, including a 90-basis-point improvement in employee costs as a percentage of sales and roughly 50 basis points of occupancy-cost improvement. Full-time-equivalent headcount increased less than 1%. Management said lower headcount growth did not reflect planned cuts. Instead, Watts and Tunniclff attributed the productivity gains to automation, artificial intelligence, role specialization and tools that reduce manual work. Watts said a process that previously could require five or six days of sourcing and quoting can now take about 15 minutes using newer technology tools. During the call, management also discussed a small acquisition related to AI and technology orchestration. Tunniclff said the transaction was not material enough to require disclosure, while Watts said the acquired company would help Fastenal advance its technology capabilities. Operating cash flow totaled approximately $422 million, or 105% of net income, while free cash flow was about $350 million, or 87% of net income. Receivables rose with sales growth, particularly among larger customers with longer payment terms. Inventory increased approximately 3% over the past year while product availability remained high. Third-quarter capital spending was about $72 million, or 2.9% of sales, focused on hub and facility capacity, automation, FMI equipment, information technology and transportation assets. Fastenal maintained its full-year expectation for net capital spending of $310 million to $330 million. The company returned $328 million to shareholders during the quarter, including $298 million in dividends and $30 million in share repurchases. Management said Fastenal returned approximately $1.2 billion over the trailing 12 months after funding operating and capital needs. Looking ahead, Tunniclff said Fastenal expects pricing to become less of a growth tailwind, but management continues to focus on gaining share and improving price-cost performance. The company said it sees continued structural opportunities to improve productivity while investing to support growth. Fastenal Company is a distributor of industrial and construction supplies serving businesses, contractors, manufacturers and other organizations. Its product offerings include fasteners such as bolts, nuts and screws, as well as safety equipment, tools, cutting tools, material-handling products, electrical and plumbing supplies, and maintenance and repair items. The company sells products through a network of branch locations, onsite customer facilities, industrial vending machines and digital platforms. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Fastenal Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

Fastenal Co (NASDAQ:FAST), the industrial supplies distributor, saw third-quarter net income rise by 20% to $401.6 million as stronger manufacturing demand and gains with larger customers lifted sales. Revenue rose 15.5% to $2.46 billion in the three months to September 30, while diluted earnings per share increased 21% to $0.35. Daily sales also grew 15.5%, reflecting customer contract wins, pricing actions and a modest improvement in industrial production during the first nine months of the year. Operating income climbed 20.2% to $530.8 million as the company controlled selling and administrative costs more effectively, raising its operating margin to 21.5% from 20.7% a year earlier. Manufacturing remained the strongest end market, with daily sales rising 17.2% as Fastenal benefited from larger customer relationships and continued demand for supplies used in production. Heavy manufacturing sales grew 20.2%, while non-residential construction sales increased 12%, extending the construction market's growth streak to six consecutive quarters. Customers with contracts accounted for 76.5% of quarterly sales, up from 73.8% a year earlier, and their daily sales increased 18.8%, significantly outperforming the 7.8% growth recorded among non-contract customers. However, the gross margin declined to 44.8% from 45.3% as a shift towards larger customers and price-related cost pressures outweighed improvements elsewhere in the business. Fastenal said larger customer relationships generally carry lower gross margins but can generate higher absolute profits through greater volumes, fixed-cost leverage and operating efficiencies. The company also lowered its 2026 target for weighted signings of its FASTBin and FASTVend inventory management devices to between 27,000 and 29,000 units, from a previous range of 28,000 to 30,000. Fastenal signed 7,484 devices during the quarter, up 6.2% year on year, while sales through its digital inventory management technology rose 14.6% to $1.12 billion. Operating cash flow increased 9% to $421.6 million, equivalent to 105% of net income, although higher receivables and inventory requirements absorbed cash as the business expanded. The company returned $328.4 million to shareholders through dividends and share repurchases during the quarter, while total debt fell to $100 million from $195 million a year earlier. Fastenal maintained its 2026 capital expenditure forecast of between $310 million and $330 million, reflecting planned investment in distribution capacity, technology and transportation infrastructure.

Image source: The Motley Fool. Wednesday, Oct. 14, 2026 - Accounting Manager - Dray Schreiber - President and Chief Executive Officer - Jeffery Watts - Executive Vice President and Chief Financial Officer - Max Tunnicliff Operator: Greetings. Welcome to Fastenal's 2026 Third Quarter Earnings Results Conference Call. [Operator Instructions] Please note, today's conference is being recorded. At this time, I'll now turn the conference over to Dray Schreiber. Thank you, Dray, you may begin. Dray Schreiber: Welcome to the Fastenal Company 2026 Third Quarter Earnings Conference Call. This call will be hosted by Jeff Watts, our President and Chief Executive Officer; and Max Tunnicliff, our Chief Financial Officer. The call will start with a general overview of our quarterly results and operations with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission or distribution of today's call is permitted without Fastenal's consent. This call is being audio simulcast on the Internet via the Fastenal Investor Relations homepage, investor.fastenal.com. A replay of the webcast will be available on the website until December 1, 2026, at midnight Central Time. As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations, and we undertake no duty to update them. It is important to note that the company's actual results may differ materially from those anticipated. Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review those factors carefully. I would now like to turn the call over to Mr. Jeff Watts. Jeffery Watts: Thank you, Dray. Good morning, everyone, and welcome to Fastenal's Third Quarter 2026 Earnings Call. I'm Jeff Watts, Fastenal's Chief Executive Officer, and I appreciate you joining us all today. Also with me this morning is Max Tunnicliff, our Chief Financial Officer. Before we get into the quarter, I would like to recognize our Blue Team. Every result we report today was earned by people in our branches, our on-sites, our distribution centers, our truck center support teams. They show up every day for our customers, they solve problems, and they keep finding better ways to help our customers run their operations. So the Blue Team, thank you. This was a very strong quarter and one you should all be very proud of. Now two quick housekeeping items before we get to the numbers. First, our slides look different this quarter. We've refreshed the format of the investor presentation to make the story easier to follow. The flow now goes from highlights to our objectives to what drove sales, financial results and then there are some key takeaways. I want to be clear about what we didn't change. Our definitions are the same, and our historical data is the same. The supporting detail you relied on is all still there. Some of it is simply moved to the appendix. The first page of the appendix shows exactly what moved and where to find it. And second, we're targeting a 45-minute call today. We expect to keep the Q&A portion broadly consistent, take about the same number of questions as usual. Now onto the quarter. And for me, I think the headline is pretty simple. Sales grew 15.5%, earnings grew faster than sales. Our net sales were $2.46 billion, up $330 million from last year. Operating margin was 21.5%, up 90 basis points, and our return on invested capital reached 32.5%, up 230 basis points. Operating income increased by $90 million from last year. That's the largest year-over-year increase in a single quarter in Fastenal's history. But I think the 3 things that really stood out to me, or stand out to me, and drove the quarter. First, growth accelerated. Second, we converted that growth into higher operating margin and faster earnings growth. And third, the quarter was driven mainly by market share gains through our key account strategy and new contract wins. Now on to Slide 5, and this really brings us back to our 3 strategic objectives. Now these are the same pillars we've discussed before and everything we do ties back to them, first being the increasing sales effectiveness. We're gaining share with larger customers through our key account strategy and new contract wins. And you can see that in our daily sales growth and in the growth of our largest customer sites. On the services, we continue to grow our FMI installed base. FASTBin and FASTVend technology, our Digital Footprint. Now these tools improve the customer experience, they strengthen retention and make both our customers and our own operations much more efficient. And then lastly, expanding our TAM, and we continue to reach revenue that we serve today through new products, new geographies, new business models and new services. You can follow our international and non-fastener growth in our monthly sales releases, and really the strategy is consistent. What changes quarter-to-quarter is the evidence, and in this quarter, I believe the evidence was strong. Now on to Slide 6 and what really drove our sales. Our customer site data continues to show progress with our larger customers, both new and existing, all growing with us. Our contract count increased 6.4% from last year, with signings weighted toward multisite national accounts. The number of sites spending $50,000 or more per month with us grew almost 19% from approximately 2,800 to roughly 3,300, and sales from those sites increased roughly 28%. Contract customers now represent over 76% of sales, and their daily sales grew 18.8%. Pricing did contribute for the quarter, approximately 2.4% to growth. That's a slower pace than earlier in the year because the year-over-year pricing contribution peaked between fourth quarter of '25 and first quarter of '26. We're now lapping some of the strongest pricing actions taken in '25. Market conditions did improve in the first half, and that improvement continued in the third quarter, but our growth exceeded the growth rates in the industrial markets that we serve. To me, that's the clear signal that we're taking share. Now on to Slide 7. Our Digital Footprint was 61.4% of sales and digital sales grew approximately 16% on a daily basis, faster than the company overall. When customers transact digitally, orders are more accurate, there's less manual work on both sides, and the relationship becomes much more integrated. We signed approximately 7,500 weighted FMI devices in the quarter, or about 117 per day compared with 110 per day last year. And our installed base passed 143,000 units, up 7%, and sales through FASTBin and FASTVend grew approximately 18%. We continue to expect 27,000 to 29,000 weighted device signings for the full year. We really believe that, that opportunity for us is clear. We need to keep moving customers toward technology-enabled replenishment because it improves service, it strengthens the relationship, and it creates efficiency for both sides. Now on to Slide 8, and this is a little different from the past. But from time to time, we'll show you a real example of how we win because I think it tells our story better than any statistic ever could. So today, I want to take a couple of minutes to highlight our customer strategy in action and show how we identify a customer challenge and bring our supply chain capabilities to life. In this example, we had a new customer that is experiencing direct material stockouts, supply chain shortages and limited control over product consumption. As their business grew, those challenges became even more significant. So after we signed the contract, we got to work. Our Lean Six Sigma specialists, they mapped the process, identified the root cause, which was a manual inconsistent system with limited automation, limited digital visibility and physical organization. From there, we continued -- we developed a road map to modernize their supply chain. And once approved, our team moved quickly. As you can see on Slide 9, we've reorganized their crib and storage areas for the direct materials. We installed clearly labeled barcoded bins, deployed our FMI technology, established planograms and connected the customer to FAST 360 to really provide greater visibility across their facility. We also established KPIs to measure ongoing performance. And the results are significant. Digital visibility increased from 0% to 99%. Replenishment is now automated, stockouts have been eliminated, inventory has been reduced and employees spend less time searching and walking for product. Over time, we expect the solution to generate anywhere between 25% to 30% in overall cost savings. But I do want to emphasize that this is only the beginning. And as we learn more about their operation and deepen the relationship, our local teams and industry specialists are going to continue to bring new products, new technology, new systems and saving opportunities to the customer. Now that's the power of our model. Initial investment creates value, that value builds trust and that trust creates opportunities to expand the relationship. Over time, those benefits compound for not only the customer, but for Fastenal as well. With that, I'll turn it over to Max to walk through the financial results. Max Tunnicliff: Thank you, Jeff, and good morning, everyone. Overall, this was a very strong quarter. Demand improved. We continued to gain share and management of our expenses helped us turn that growth into higher operating margins and earnings. Sales grew 15.5%, while operating earnings and earnings per share grew roughly 20%. I'll start with the business and market trends on Slide 10. Industrial conditions improved further in the third quarter. U.S. manufacturing PMI averaged nearly 55, and industrial production for our key end markets remained positive. This is consistent with the gradual improvement we've seen since late last year. Although momentum remains stronger in select industrial markets than in the traditional manufacturing and automotive area. Our daily sales grew -- improved to 15.5% from 14.7% in the second quarter. The improvement was driven primarily by new customer wins, greater share of spending with existing customers and improving industrial activity. Customer demand remained healthy overall. What we heard from the field was consistent with our results. Growth opportunities were strongest in data centers and other high-demand markets, while softness remained concentrated in a smaller number of areas. The slide shows how broad the improvement was. Heavy manufacturing led the way again. It represented approximately 45% of sales and daily sales grew approximately 20%. Growth was strongest in key accounts, machine products, aerospace and industrial equipment. Other manufacturing grew approximately 13%, showing that the improvement extended beyond the largest accounts and strongest verticals. Construction and other nonmanufacturing markets also contributed. Nonresidential construction continued to grow, supported by infrastructure, electrical and utility activity, while transportation and reseller customers also posted solid gains. By material type, direct materials increased approximately 19% compared with approximately 14% in indirect materials. This reflected stronger customer production activity, large customer signings, improved product availability and pricing actions. Several higher growth product categories also outpaced the company overall, particularly electrical, tools and other industrial products. To summarize, industrial activity improved during the quarter, but our growth continued to significantly outpace the market. The common thread was our continued progress with larger customers, reflecting ongoing share gains from our key account strategy, new contract wins and embedded supply solutions. Turning to the financial results on Slide 11. The key message is that we converted strong sales growth into higher operating margin and earnings. Operating margin increased 90 basis points to 21.5% as 130 basis points of SG&A leverage more than offset a 40 bps decline in gross margin. Gross margin was approximately 45%, down 40 basis points from last year, but 20 basis points above second quarter. Customer mix remained the primary year-over-year headwind, consistent with our strategy. Beyond mix, 2 items warrant discussion this quarter. Price/cost, which we will continue to address until we return to neutrality and favorable items that benefited the quarter but may not continue at the same level in the underlying rate. First, customer mix. It's approximately a 50-basis-point headwind, reflecting growth with large customers and continued execution of our strategy. This mix pressure reflects the continued success of our larger customer strategy. These customers generally carry lower gross margins, but their higher volumes and more efficient service models support attractive operating margins and incremental operating profit. Price/cost was approximately a 30-basis-point headwind and improving approximately 10 basis points from the second quarter, marking another quarter of sequential improvement. The year-over-year pricing contribution is slowing after peaking between the fourth quarter of '25 and the first quarter of '26. We will continue to report on price/cost while it remains a headwind, and we remain focused on disciplined pricing and returning to neutrality. Favorable items added approximately 40 basis points to gross margin, including direct sourcing savings, supplier rebates and tariff refunds. About 20 basis points of this 40 reflect timing across these items and should not be assumed to continue in the underlying gross margin run rate. SG&A provided 130 basis points of leverage, reflecting expense growth well below sales growth. Employee costs improved by 90 basis points as a percentage of sales, while total full-time equivalent headcount increased less than 1%. This reflects productivity, role specialization and the benefits of technology and automation. Occupancy costs improved by approximately 50 basis points as higher sales were spread across our existing branch, Onsite and distribution network. All other SG&A increased slightly as a percent of sales, reflecting continued investment in tech, analytics, supply chain and sales support. In total, SG&A leverage expanded operating margin by 90 basis points to 21.5%. This demonstrates how we are executing our strategy, using our infrastructure, tech and digital capabilities to scale effectively and efficiently while continuing to invest for growth. Return on invested capital increased 230 basis points to 32.5% on a trailing 12-month basis, comparing that with a 10-year average of approximately 28%. The improvement reflects stronger operating earnings and continued discipline in working capital and capital spending. Overall, the quarter demonstrates that we can grow with larger and more complex customers, while continuing to invest in the business and improve operating margins and returns. Turning to cash flow and capital discipline on Slide 12. Operating cash flow was approximately $422 million, or 105% of net income. The year-over-year conversion was lower primarily because receivables increased with strong sales growth, particularly with larger customers who generally carry longer payment terms. Inventory increased approximately 3% over the past year, well above the growth in sales, while product availability remained high. That performance reflects more disciplined inventory positioning and better use of the inventory already in our network. Accounts payable increased as purchasing rose to support growth. Free cash flow is approximately $350 million, or 87% of net income, providing capacity to fund growth investments and return capital to shareholders. Third quarter capital spending was approximately $72 million, or 2.9% of sales. Spending was directed primarily toward hub and facility capacity, automation, FMI equipment, information technology and transportation assets. For full year '26, we continue to expect net capital spending of $310 million to $330 million. The program includes hub network capacity, FMI and automation equipment, information technology projects and transportation assets. We returned $328 million to shareholders during the quarter, $298 million of which was through dividends and $30 million through share repurchases. Together, that represented nearly 82% of net income. Over the trailing 12 months, we returned approximately $1.2 billion after funding our operating and capital needs. Our approach to capital is unchanged. We invest in the business where we see strong returns, return excess cash to shareholders and keep a conservative balance sheet. So overall, we delivered strong growth, expanded margins and generated healthy cash flow while continuing to invest for the future. The quarter reflects disciplined execution across the business. With that, I'll turn it back to Jeff for the key takeaways. Jeffery Watts: Thanks, Max. Before we open the line, I think I just want to leave everyone with 3 points. The first, our growth was broad-based, reflecting share gains across large accounts and embedded supply solutions. Second, we converted that growth into higher operating margin and earnings, while price/cost improved sequentially for the second consecutive quarter. And third, our model is compounding. New customer wins create embedded spend, technology deepens those relationships and our scale allows us to grow profitably while continuing to invest. Now this quarter demonstrates the strength of our strategy. We gained share, expanded margins, generated strong cash flow and improved returns. And I think I'll close where I started with our people. This business is -- it's always been built one customer and one relationship at a time by a Blue Team that takes ownership, and I'm very excited about where we're headed. With that, operator, I think we're ready for questions. Operator: [Operator Instructions] And our first question today comes from the line of David Manthey with Baird. David Manthey: A 2-part question on gross margins. First off, number one, the 20 basis points of timing benefits, could you give us your definition of timing? I mean, is that catching up for past accruals? Or is it pulling benefits from fourth quarter back into the third quarter? And then second, if fuel prices stay at current levels, is it possible that the 30-basis-point price/cost gap actually gets larger in the fourth quarter? Those 2 questions, please. Operator: Ladies and gentlemen, please stand by. We're experiencing difficulties. We'll resume momentarily. [Technical difficulty] Max Tunnicliff: Dave, you there? Operator: Ladies and gentlemen, thank you for standing by. Please go ahead, sir. Max Tunnicliff: Sorry about that, Dave and company. Jeff told me, I got to take accountability because it was me, I hit the wrong button, trying to unmute ourselves. So I apologize. Jeffery Watts: It was not a question. Not trying to burn time. Max Tunnicliff: Okay. Dave, 2-part question. First of all, you asked about the bps of timing. Let me define that. Part -- just candidly, part of that and roughly half of that was tariff refunds, very immaterial, but we don't see that coming through in any material level in Q4. So first of all, the amount of 10 bps in that regard is quite small. And second, just because of the phasing and the type of IEEPA tariffs we paid and the sequence of receiving those, that's going to be probably somewhere in the early part of next year before we see that back in our run rate. The other half is a bit more of a timing element in regards to primarily volume rebates with suppliers. And so we did have to do a little bit of a catch-up on that benefit, knowing that we were going to start to trip into various tiers in the quarter. So that would be that. And that's why we want to talk about a trend that would exclude that from Q4. Fuel levels, yes, this one is an extremely interesting one. And the reason I say that is, first of all, you know our business, in that we do a pretty good job offsetting that inflation in our business. It's not generally possible to offset all of it. But the impact on our business is it's real. It's -- I'd say in Q3, very flat-ish to what the impact was in Q2, but versus the first quarter versus last year, it's fairly significant. Now to your point, we see enough traction in our price execution, enough traction in that space. We've seen enough traction in the way that we handle fuel costs to feel comfortable that we're not going to be in a situation in Q4 where the price/cost becomes -- widens the gap, to answer your question directly. We had a pretty nice exit rate out of Q3, particular to net price/cost, which we expect to continue. But I can't make a confident statement like that without suggesting that we all know that these types of elements, inflation direct or indirect regarding fuel, diesel can have a pretty big consequence in our business. And I'll take a moment, too, just to answer and make one more point around fuel that I think is -- it's more structural to Fastenal. So why don't we have to refer to diesel costs and fuel costs as a major impact on our business. And a lot of it just has to do with our captive fleet. We choose our own routes. We were able to put a lot of product that otherwise would need to be small parcel on our own vehicles. And so we're able to structurally mitigate a lot of the impacts of some of this inflation, albeit it still sits in our P&L to some extent. Operator: The next question is from the line of Steve Volkmann with Jefferies. Stephen Volkmann: Great. I'm going to switch to the growth side of this and your helpful Slide 21. It's just interesting to me that the September sequential change sort of underperformed normal seasonality based on your chart here, and that's the first time we've seen that for a number of months here. So I'm just curious, I think Max might even have mentioned there were some very limited areas where you saw some weakness or something. I don't want to put words in your mouth. But anything to call out relative to sort of how the quarter progressed and maybe why September was a little bit lower than seasonality? Jeffery Watts: I'll take that, Max. September still was a strong month at 14.4%, but it was below July and August. We're starting to lap some pricing, but I think I'm more focused on the 2-year growth of 27% and more importantly, the January to September sequential growth. And that's over 18%, which is well above our historic trend. And really, I think the most important number is we move into Q4 and more importantly into Q1. I think what also -- when we look at those numbers, especially in September, what gives me a lot of confidence is really what's underneath that headline number. Contract sales grew at 19%. Our large customer sites continue to grow well, and we continue to gain share. I don't think I'd describe -- I think I would describe September as more of a moderation from very strong levels, not so much a change from the strategy of customer activity behind it. I don't know if you want to add anything to that? Max Tunnicliff: Steve, I'll add on just the point around where in our end markets are we seeing a bit more of a slower pace. And so even some of our -- what we would call "weakest areas," albeit whether it's resellers, a little bit on the government side is still -- our end markets, we're still performing in the low double digits. A couple notable areas of weakness that we're just sensing more in the economy is more around ag and food, but we don't feel that -- that's clearly to us not an underperformance on our side. It's just part of the economy, and what's happening there. Yes, so as Jeff said, in September and looking ahead, we don't see any change in our underlying share gains, the way that we calculate our impact to what we've called in the past self-help. We also don't see anything yet that would concern us from a macro economy perspective that we haven't already seen in the past couple of quarters. So yes, a little below our sequential trends, but nothing that causes us to change our future perspective on our business. Operator: The next question is from the line of Tommy Moll with Stephens. Thomas Moll: I wanted to start maybe to tie up the conversation on gross margin and then pivot to a strategic question as a follow-up. But on gross margin, in 3Q, 40 bps lower year-over-year. If we take away the 20 bps of timing help, that gets us to down 60 bps, is that the baseline assumption we should work with for Q4, or are there any other crosscurrents that you want to call out for us? Max Tunnicliff: Yes, Tommy. So you know our business well and that based on our strategy, one of the elements that comes from that strategy is just a consistent mix negative impact on margin, and that's both big customer growth focused, which shows up in leverage, and it's also just where we grow geographically, especially internationally. And so yes, the around 60 bps is a good underlying point on a year-over-year basis to consider. So your question was beyond that known item, what else might we want to consider for Q4? And you can look at it a couple of different ways. One is if you just take the sequential, you don't -- the mix question doesn't impact, and we have a normal sequential pattern. Now we don't provide guidance on a quarterly or annual basis, as you well know, but we do want to and do point out when there's something significant in our run rate. And so aside from the -- if you take a sequential pattern, aside from the 20 bps that I mentioned, there's nothing significant. We've talked about our goal of price/cost neutrality. Of course, delivering that goal would be a sequential benefit. If you flip to a year-over-year basis, same comment. If there's something really big, we would call it out. If you recall, from Q4 of last year, we did talk about a significant amount of timing in our gross margin, and it was a negative 50 basis points, the way we described it last year. So if you're doing a year-over-year comp, you want to take that into account along with the mix. So we'll have a positive tailwind coming from the timing elements from last -- assuming no timing elements in Q4 this year. And then you'll have the offset mix component. And then as you read through our results and looked at our Q3 deeper and deeper, you'll notice also that we have a little bit of benefits in the run rate. Again, it's the 40 bps that we mentioned as a benefit offsetting mix and offsetting price/cost, and around half of that was timing, that means 20 bps remain. And so that's the way I'm thinking about both from a sequential perspective and a year-over-year perspective on gross margin. Now I can't -- again, I don't want to escape that answer without saying we don't have the crystal ball everyone wishes we -- everyone had and some of these elements, a lot of our mix is dynamic or the inflation is dynamic and our pricing conversations are dynamic. Thomas Moll: Understood and appreciate it. And as a follow-up question, I wanted to ask about some press mentions recently of an AI-related acquisition. I don't think it was mentioned in the materials today. And my guess is this is pretty small, but could you just give us any details there, and how -- maybe explain how it ties into your broader strategy? Max Tunnicliff: Yes. I'll talk maybe just scope its size, and why it wasn't mentioned publicly, and then I'll give it to Jeff. But first of all, just broadly, when we think about M&A for Fastenal in the near term, we're not -- we don't see a need for anything large. But we've made that clear in the past. But at the same time, we find opportunities, and we look for opportunities to improve our capabilities. And oftentimes, those are not going to be large enough to even be disclosable and sometimes not large enough to even speak to on the call, but we look at the ROI on those as being, in some cases, a little bit in a way, limitless. So these are investments, and this is an example of one, and I'll turn it over to Jeff. But yes, small, but we don't -- we wouldn't waste our time with something small that we didn't think has a positive coming in the future. Jeffery Watts: Yes. I think on this acquisition, I mean, we've known this company for quite some time. What they kind of brought us was some orchestration that we needed around our AI and our technology as we move forward. And it was an opportunity that, again, Max was -- it's not maybe as material or maybe more immaterial, but for us as a company, when we see an opportunity like this, obviously, we jumped on it, and it's going to help us grow a lot faster on the tech side. Operator: Next question is from the line of Ryan Merkel with William Blair. Ryan Merkel: Nice job on the new slide deck. Jeffery Watts: Thank you, Ryan. Ryan Merkel: Wanted to ask first on data centers. You mentioned that was a strong market. So I'll leave it kind of open-ended. Just curious how you see that impacting demand. And in your answer, maybe talk about the data center pods. Think you're having a lot of success there. Jeffery Watts: I mean overall, obviously, the data centers are a meaningful contributor to our sales. Right now, internally, we look at about 4% to 5% of our -- 4 to 5 percentage points of our growth. The work really spans the data center that we're seeing. The impact we see comes from the construction contractors and the manufacturers supplying the build-out. We really serve that through existing customer relationships. But it is difficult to really get a grasp between how much of the data centers is coming out. We should give you a stronger number part of our growth. But on the pod side, I'll turn that over to Max, he can talk a little bit about that. Max Tunnicliff: Yes. It's -- just to reiterate what Jeff said, it's -- we want to calculate the impact better than we can, but it's just -- as you know, the fingers are all over the place on data centers, and it's a bit of a tough one to call on the impact, but it is -- it's big enough to call out. Yes, the pods are more of a -- if I get your question, just more of an approach on how we're innovating on thinking about how to service data centers and in a way, I guess I think of it this way is -- and I haven't heard this internally, so I could -- hopefully, I'm not off, but it's more like it's setting up shop almost like an Onsite and being as close to the customer as possible, which is always our strategy. It's our winning strategy we've had. And so the teams innovated and found a way to service these growing customers in the best possible way. Jeffery Watts: I think for us, it's a way to try to keep up with the demand because it's coming so fast, that having that Onsite, that pod on-site, it's just helping us keep up with the day-to-day demand, which is sometimes pretty overwhelming on the speed in which they need the product. Ryan Merkel: Got it. All right. No, that's helpful. And then second question is just on price/cost. Just curious what you think that looks like in 4Q? I think I heard you say the exit rate was better coming out of 3Q? And do you expect to be back to neutral in maybe 1Q of '27? I know it's a bit of a moving target, maybe suppliers are raising prices, but just what are your thoughts? Jeffery Watts: Yes, you're exactly right. It's a moving target. But I wouldn't dispute, our goal is as quickly as possible as it always has been. And fortunately, we are making progress. But I think the way you articulated it, Ryan, feels very reasonable to me. Operator: Our next question is from the line of Christine Yao with Morgan Stanley. Tingbing Yao: One thing that stood out in the September print was the divergence between, I guess, heavy manufacturing, which continues to grow north of 20% on average for 3Q and non-resi construction, which slowed quarter-over-quarter. Can you help us unpack what's driving that divergence? For example, is it something specific to certain projects or customer types? Or are you seeing a broader change in activity? Jeffery Watts: Yes. I wouldn't say that there was a big slowdown in construction by any means. And construction, it can move around with project timing. Growth did slow from a very strong Q2, but it still remains healthy. And year-to-date, our construction fastener growth remained extremely healthy. We're watching it, but I don't know if we're seeing anything that changes our broader view on the construction side. The manufacturing side, yes, continues to do very well, very strong demand there. So yes, on the construction, I don't think we have anything that would change our broader view. Tingbing Yao: Got it. That's very helpful. And September came in below typical seasonality. And I wonder, was there anything unusual in customer ordering patterns during the quarter that helped explain the softer exit rate? Max Tunnicliff: No. I kind of like what I said earlier. I mean, if you really look at the numbers, the last 5 months previous to September, we outgrew our historic rate. Personally, we're lapping some pricing from last year. We don't really see anything out of the ordinary as far as demand goes, especially on the manufacturing side. I just think we have a very good sequential trend January through September, and I wouldn't read too much into it. Operator: The next question is from the line of Ken Newman with KeyBanc Capital Markets. Zachary Sherman: This is Zac on for Ken. Just 2 quick ones. So the comps get tougher heading into next year. First, is it fair to assume like a mid- to high single-digit growth? And then if that is a fair scenario, what should incrementals look like for FAST? Max Tunnicliff: Yes, Zac, I'll take the start on this, and then Jeff can add in if he'd like. It's a bit of a -- it's a forecasting kind of guidance question. And I'll just -- I'll give a couple of points of color. One that you want to keep in mind is just that we are -- as we approach next year, the pricing tailwind, if you will, of course, will slow a little bit. And the way that we look at our business is we focus a lot of our gauge of our success on the share gains. And so just as we responded to September, we monitor that. And so we see a consistent share gain pattern ahead of us based on our potential and what we're driving. And so then the rest is -- and we would assume less pricing. And so then the market dictates the rest of our performance. And so without giving you the figures, yes, that's probably going to -- I mean we expect -- our success, we think, in any environment should be 10 percentage point top line improvement each and every year. That's what we hold ourselves accountable for internally, but that's not a forecast or guidance either. So hopefully, that helps put a little context there. And then you asked about incrementals, I think. So on the incremental operating margin level, we continue to believe that our business, when we're growing double digits, should be in the mid-20s, if not higher. And that's what we goal ourselves to achieve. And so that, if you will, not guidance, but if that -- what we said consistently in the past holds, and I think it's proving itself out this quarter, even if you take out the one-time events, we're in that mid-20 range. And that's where we expect to be. That's the healthy point of our fast-growing business is to be in the mid-20s. Jeffery Watts: Yes. I would just add, as pricing rolls over, what really replaces it for us is it's volume and share. I mean price -- I mean, it did help this quarter, but I think the bigger story for us is our contract growth, our customer site expansion, a lot of the newer wins and deeper penetration. As we anniversary maybe some of that pricing, our reported growth is going to grow naturally, less help, I guess, from price. And I guess that's the math. But it doesn't really change the underlying customer activity that we see. Max Tunnicliff: And even said -- just to illustrate what Jeff just said, if we just used pricing as a barometer looking ahead through the year we're walking through, there would be an expectation that we would have slowed down, and so we have picked that up with share gains. And of course, the market has helped, not significant, but it's helped even sequentially. So hard to tell on the future on that piece, but we're going to keep driving for the largest growth, obviously, a percentage that we can do and with the right incremental margins. Jeffery Watts: Our sequentials are strong. Operator: Our next question is in the line of Chris Dankert with D.A. Davidson. Christopher Dankert: I hope we could focus in a little bit here on SG&A, impressive leverage in the quarter. I guess, hard not to note is that sales force headcount is down over 400 heads versus where we were in June. Can you just kind of put that in context? Is this -- are there additional cuts planned? Is this just kind of a good hygiene reset? Maybe just kind of give us an update on heads there. Max Tunnicliff: Yes, Chris, I'll take that to start. First, I wouldn't -- I definitely wouldn't use the term cut because our business is a growth business. And we are -- there's no CFO or CEO sitting here, putting a headcount cap on areas that are important to our business. And so this is really the output of a lot of the work that the teams have done, not just in months or quarters but years, getting role specialization, putting the work in the right place, automating, using AI and the focus on large customers. And so all of those lead to significant efficiencies. And so I wouldn't even call it a reset, but this is our ability to grow this business without growing headcount nearly as fast using the tools at our disposal. Jeffery Watts: Yes. I would add that we're not going to starve the business to create a better margin quarter. But just to add in to what Max was saying, a lot of the decisions in the field, they're being made in the field. And instead of maybe in the past, before we were kind of getting all the digital tools and all the different things out to the field, that natural reaction would be, "Hey, we landed this account, I need to add 2 or 3 heads." Now that those same managers, they're calling in and saying, "Hey, we don't need the 2 or 3 heads. We need this tool. Now that we have this tool, we can do it with half." And that's really what is becoming. There's definitely no headcount or restriction on adding labor. We're going to add labor to help wherever we need to continue to grow our business. Christopher Dankert: That's really, really helpful, guys. I guess my surprise is just, I guess, historically, you signed Onsites, you add contracts, you require just more labor energy. This seems like a material change. I guess -- is there a specific tool in particular to help you guys lever because it's a marked departure, it feels like. Jeffery Watts: I mean, I can -- I mean, there's a number of tools, but a few years back when I was traveling to branches, I was looking at how we were quoting business. And it upset me because honestly, it was the same way I quoted business 30 years ago when I was in a branch and at the time of 2024, that can't exist. So a lot of the new tools we've got in instead of taking maybe 5, 6 days of sourcing and quoting, that same tool now using AI and some of our internal technology, it may take 15 minutes. I mean that time savings alone. That's just one example, but we really looked at the branch efficiencies first when we're developing the tools, and then we kind of went from there up. And it's having a real impact in the field and on our head count. I know we started a little late. So we'll add one more question. I think we have time for one more question. Operator: The question will be coming from the line of Guy Hardwick with Barclays. Guy Drummond Hardwick: Sorry to go back to the gross margin. But if you think about it on a year-on-year basis, should we assume that Q4 and perhaps into next year, you still have the mix headwind of large customers growing faster than small and midsized customers to offset perhaps better price/cost and some other tailwinds that you referenced in the Q3 press release. Max Tunnicliff: Yes, Guy, I'll state the way I'm looking at it. So we will -- we do expect to always not -- always is hard to define. We expect over the coming years as we continue to deploy our strategy of really winning with the biggest customers, not ignoring the midsize, but focusing on the big ones, focusing on the customers that are midsize, that can be big customers. That's a very deliberate strategy that will usually result in a year-over-year impact of around 60 basis points, 50 basis points in that ballpark. The other mix components of our business are largely not material, whether it be product mix and things like that. Now we'll have some geographic mix as we grow faster, as I said earlier. So yes, you would on a year-over-year basis, typically expect a starting point of a 50- to 60-basis point headwind on our gross margin. As you look at Q4, and if you look back at our materials from Q4, you would factor in what we described as 50 basis points of timing that we encountered in Q4 of 2025. And that would be -- that would largely offset, if not wash it completely away that mix impact in the quarter. And then of course, we're always looking for opportunities, whether in margin, whether it's sourcing, of course, the pricing work all those other things. But I give you just the mix component as a baseline starting point with our margin profile. And Guy, if you had a second question that's perfectly fine, too. We -- as Jeff said, I hung up on you all, so we don't want to end too early. But if there was a follow-up question, feel free. Otherwise, we'll move into the close. Guy Drummond Hardwick: Yes. Obviously, of course, you did already. There's very good spread between gross profit growth up 14% and OpEx up about 9.5%. I know you kind of answered it on the incrementals question, but to what extent was that less than double-digit growth in OpEx, I think it was improved versus the previous quarter, helped by the headcount reduction or the natural reduction in head count. And is that sort of a trend going forward, how we should think about headcount, total OpEx growth and maybe headcount growth as well if you have any thoughts on that? Max Tunnicliff: Yes. The largest driver, you're right, was headcount. Second was occupancy expenses. And so we're not providing guidance on these elements is the thing, but we're -- this is not like -- there's -- as you can tell from our comments around what's driving this, there's a structural benefit to our head count and in fact, direct/indirect impact on our occupancy that we see going forward. And so we've got a little more runway on getting better usage of tools, putting work in the right place, call it, optimizing our footprint. Of course, we're going to keep adding hubs and doing those things. And some of that could be footprint changes from the branch side. So we're going to constantly pursue cost opportunities and efficiency opportunities while focusing on number one, growing the business. And so yes, I just want to reiterate, it's not -- this is not a blip, like a one-time blip. It's more of a structural improvement in way of working within our sales force primarily. And I shouldn't exclude it just sales force. It's our labor. Jeffery Watts: Thank you. So it looks like we've come to the end of our time. I'll just kind of close it out with this. My thanks again to the Blue Team. Q3 was strong, and it was led by share gains. Earnings grew faster than sales. Operating margin expanded and returns on capital remained excellent. And we still have some work to do, I think, on the price/cost and maybe some of our execution, but the strategy is working and the Blue Team is executing. So we're staying very disciplined. And I just want to thank you all for your time today, and hope you have a great rest of your week. Thank you. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation, and have a wonderful day. Before you buy stock in Fastenal, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fastenal wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Fastenal. The Motley Fool has a disclosure policy. Fastenal (FAST) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

- Daily sales increased 15.5% year-over-year, primarily driven by share gains with larger customers, pricing actions, and broad-based demand across core end markets. - Operating margin was 21.5%, a 90 basis point improvement year-over-year, as selling, general, and administrative expense leverage more than offset customer mix-related gross margin pressure. - Operating cash flow was $422 million, representing 105% of net income, reflecting the timing of working capital changes associated with strong sales growth. - Returned $328 million to shareholders through dividends and share repurchases, representing 82% of net income. - Continued progress on strategic initiatives, including increased sales effectiveness through key account wins, expansion of digital technologies, and deeper penetration through new customer site growth. WINONA, Minn., October 14, 2026--(BUSINESS WIRE)--Fastenal Company (Nasdaq:FAST) ('Fastenal,' 'we,' 'our,' or 'us'), a global leader in supply chain services, today reported results for the third quarter ended September 30, 2026. Results reflected strong daily sales growth, operating expense leverage, and continued growth with larger customers supported by our Onsite, digital, and supply chain solutions. Except for share and per share information, or as otherwise noted, amounts are stated in millions. Percentage and dollar calculations, which are based on non-rounded dollar values, may not be recalculated or footed using the dollar values included in this document due to the rounding of those dollar values. PERFORMANCE SUMMARY | Nine-month Period | | Three-month Period | | 2026 | | | 2025 | | | Change | | | 2026 | | | 2025 | | | Change Net sales | $ | 7,051.9 | | | 6,173.1 | | | 14.2 | % | | $ | 2,463.3 | | | 2,133.3 | | | 15.5 | % Business days | | 191 | | | 191 | | | | | | 64 | | | 64 | | | Daily sales | $ | 36.9 | | | 32.3 | | | 14.2 | % | | $ | 38.5 | | | 33.3 | | | 15.5 | % Gross profit | $ | 3,151.3 | | | 2,792.5 | | | 12.8 | % | | $ | 1,104.7 | | | 965.8 | | | 14.4 | % % of net sales | | 44.7 | % | | 45.2 | % | | | | | 44.8 | % | | 45.3 | % | | Selling, general, and administrative (SG&A) expenses | $ | 1,671.1 | | | 1,521.1 | | | 9.9 | % | | $ | 573.9 | | | 524.3 | | | 9.4 | % % of net sales | | 23.7 | % | | 24.6 | % | | | | | 23.3 | % | | 24.6 | % | | Operating income | $ | 1,480.2 | | | 1,271.4 | | | 16.4 | % | | $ | 530.8 | | | 441.5 | | | 20.2 | % % of net sales | | 21.0 | % | | 20.6 | % | | | | | 21.5 | % | | 20.7 | % | | Income before income taxes | $ | 1,481.6 | | | 1,270.4 | | | 16.6 | % | | $ | 531.2 | | | 440.6 | | | 20.6 | % % of net sales | | 21.0 | % | | 20.6 | % | | | | | 21.6 | % | | 20.7 | % | | Net income | $ | 1,124.2 | | | 964.4 | | | 16.6 | % | | $ | 401.6 | | | 335.5 | | | 19.7 | % Diluted net income per share | $ | 0.98 | | | 0.84 | | | 16.5 | % | | $ | 0.35 | | | 0.29 | | | 19.8 | % | | | | | | | | | | | Note – Daily sales rate (DSR) is defined as the total net sales for the period divided by the number of business days (in the U.S.) in the period. QUARTERLY RESULTS OF OPERATIONS Sales Net sales increased $330.0, or 15.5%, in the third quarter of 2026 when compared to the third quarter of 2025 (both periods had the same number of business days). Sales performance reflects the contribution from improved customer contract signings since the first quarter of 2024, product pricing, and a modest improvement in industrial production in the first nine months of 2026. Foreign exchange rates negatively impacted sales growth by approximately 10 basis points in the third quarter of 2026 as compared to the third quarter of 2025 when foreign exchange rates contributed approximately 10 basis points to sales growth. The impact of product pricing on net sales in the third quarter of 2026 was an increase of approximately 240 basis points, compared to an increase of 240 to 270 basis points in the third quarter of 2025. From a product portfolio standpoint, we classify our offerings into four primary categories: fasteners, safety supplies, cutting tools, and other product lines. 'Other product lines' encompasses seven smaller product segments, including tools and janitorial supplies. Beginning in the fourth quarter of 2025, we expanded our reporting to provide a more comprehensive view of direct (original equipment manufacturing/production) and indirect (maintenance, repair, and operations/facilities maintenance) business across product categories. Direct materials generally include products incorporated into finished goods or that directly support customers' production processes, while indirect materials support customers' facility operations, maintenance, and safety needs. During the third quarter of 2026, direct materials outpaced indirect materials, reflecting greater contribution from fastener sales and continued strength with manufacturing customers. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows: | DSR ChangeThree-month Period | | % of SalesThree-month Period | 2026 | | 2025 | | | 2026 | | 2025 | Direct fasteners/hardware | 16.8 | % | 15.3 | % | | 21.0 | % | 20.9 | % Direct cutting tools and abrasives | 19.5 | % | 13.4 | % | | 5.4 | % | 5.2 | % Direct non-fasteners/hardware | 21.2 | % | 12.9 | % | | 13.3 | % | 12.8 | % Total direct materials | 18.6 | % | 14.2 | % | | 39.8 | % | 38.9 | % Indirect fasteners/hardware | 7.6 | % | 15.3 | % | | 9.3 | % | 10.0 | % Indirect safety | 13.0 | % | 10.6 | % | | 20.8 | % | 21.4 | % Indirect non-fasteners/hardware and non-safety | 17.5 | % | 8.7 | % | | 30.1 | % | 29.7 | % Total indirect materials | 14.3 | % | 10.4 | % | | 60.2 | % | 61.1 | % From an end market standpoint, we have four categories: heavy manufacturing, other manufacturing, non-residential construction, and other, the latter of which includes reseller, government/education, transportation, warehousing and storage, and data centers. Our manufacturing end market growth was mainly due to the relative strength we are experiencing with key account customers with significant managed spend, where our service model and technology are particularly impactful. The non-residential construction end market experienced growth for the sixth quarter in a row. Other end market sales were favorably impacted by growth with transportation and reseller customers. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows: | DSR ChangeThree-month Period | | % of SalesThree-month Period | 2026 | | 2025 | | | 2026 | | 2025 | Heavy manufacturing | 20.2 | % | 12.4 | % | | 44.6 | % | 43.1 | % Other manufacturing | 13.2 | % | 12.9 | % | | 32.0 | % | 32.8 | % Total manufacturing | 17.2 | % | 12.7 | % | | 76.6 | % | 75.9 | % Non-residential construction | 12.0 | % | 7.5 | % | | 8.0 | % | 8.3 | % Other end markets | 12.4 | % | 8.9 | % | | 15.4 | % | 15.8 | % Total non-manufacturing | 12.3 | % | 8.4 | % | | 23.4 | % | 24.1 | % From a customer standpoint, we have two categories: 1) contracts, which include national multi-site, local and regional, and government customers with significant revenue potential, and 2) non-contracts. Sales with our contract customers continue to outperform as we realize incremental sales from implementing customer signings that we have achieved since the first quarter of 2024. Non-contract customers tend to be smaller and utilize fewer of our tools and capabilities, providing fewer avenues for share gains and therefore more closely reflect overall business trends. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows: | DSR ChangeThree-month Period | | % of SalesThree-month Period | 2026 | | 2025 | | | 2026 | | 2025 | Contract sales | 18.8 | % | 13.2 | % | | 76.5 | % | 73.8 | % Non-contract sales | 7.8 | % | 7.2 | % | | 23.5 | % | 26.2 | % Customer Sites and Sales Segmentation We engage customers in the local market by delivering services and solutions within or near the customer's business (Sites). Sites represent distinct customer locations where we maintain inventory tailored to local demand, supported by our regional distribution networks. Our strategy prioritizes customer Sites with monthly sales potential of $50,000 or more. Segmentation by spend level provides insight into the scale and potential of customer relationships served through our network. The following table summarizes average customer Site counts by monthly spend band and related sales metrics. | | Three-month Period2026 | | | | Three-month Period2025 | | | Sites (#) (1) (2) | | Sales | | Mo. Sales per Site (3) | | | | Sites (#) (1) (2) | | Sales | | Mo. Sales per Site (3) | Manufacturing | | | | | | | | | | | | | | | $50k+/Mo. (4) | | 2,730 | | $ | 1,239.4 | | $ | 151,331 | | | | 2,304 | | $ | 971.8 | | $ | 140,596 | | | | | | | | | | | | | | | | $10k+/Mo. | | 9,534 | | | 1,693.4 | | | 59,206 | | | | 8,913 | | | 1,411.5 | | | 52,788 | $5k+/Mo. | | 14,023 | | | 1,789.9 | | | 42,547 | | | | 13,385 | | | 1,507.6 | | | 37,545 | Other sales (5) | | 26,527 | | | 95.2 | | | 1,196 | | | | 28,936 | | | 103.0 | | | 1,187 | Total manufacturing | | 40,550 | | $ | 1,885.1 | | $ | 15,496 | | | | 42,321 | | $ | 1,610.6 | | $ | 12,668 | | | | | | | | | | | | | | | | Non-manufacturing | | | | | | | | | | | | | | | $50k+/Mo. (4) | | 558 | | $ | 217.1 | | $ | 129,689 | | | | 467 | | $ | 170.1 | | $ | 121,413 | | | | | | | | | | | | | | | | $10k+/Mo. | | 3,601 | | | 403.3 | | | 37,332 | | | | 3,282 | | | 340.5 | | | 34,583 | $5k+/Mo. | | 6,534 | | | 465.2 | | | 23,732 | | | | 6,134 | | | 400.9 | | | 21,786 | Other sales (5) | | 43,675 | | | 113.1 | | | 863 | | | | 50,368 | | | 121.8 | | | 806 | Total non-manufacturing | | 50,209 | | $ | 578.2 | | $ | 3,839 | | | | 56,502 | | $ | 522.7 | | $ | 3,015 | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | $50k+/Mo. (4) | | 3,288 | | $ | 1,456.6 | | $ | 147,668 | | | | 2,771 | | $ | 1,141.9 | | $ | 137,363 | | | | | | | | | | | | | | | | $10k+/Mo. | | 13,135 | | | 2,096.7 | | | 53,209 | | | | 12,195 | | | 1,752.0 | | | 47,888 | $5k+/Mo. | | 20,557 | | | 2,255.0 | | | 36,565 | | | | 19,519 | | | 1,908.5 | | | 32,592 | Other sales (5) | | 70,202 | | | 208.3 | | | 989 | | | | 79,304 | | | 224.8 | | | 945 | Grand total | | 90,759 | | $ | 2,463.3 | | $ | 9,047 | | | | 98,823 | | $ | 2,133.3 | | $ | 7,149 | (1) | | Sites represent the number of customer locations served by our network. Individual customers with multiple locations will have multiple customer Sites. (2) | | Sites numbers reflect the monthly average of active Site counts. (3) | | Monthly sales per Site totals are not rounded to the millions and represent the exact dollar amount. (4) | | $50k+ Sites are disclosed as a representation of Onsite-like customers and are also a subset of $10k+ and $5k+ Sites. (5) | | Other sales represent sales to Sites under $5k per month and sales that are not tied to a specific Site. This includes certain service fees, cash sales, direct ship sales, etc. Digital Technology Fastenal Managed Inventory (FMI®) Technology comprises our FASTStock℠ (scanned stocking locations), FASTBin® (infrared, RFID, scaled bins, and FASTBin® - Click), and FASTVend® (vending devices) offerings. FASTStock's fulfillment processing technology is not embedded, is relatively less expensive to deploy and highly flexible in application, and is delivered using our proprietary mobility technology. FASTBin and FASTVend incorporate highly efficient and powerful embedded data tracking and fulfillment processing technologies. The first statistic below is a weighted FMI measure, which combines the signings and installations of FASTBin and FASTVend in a standardized machine equivalent unit (MEU) based on the expected output of each type of device. We do not include FASTStock in this measurement because scanned stocking locations can take many forms, such as bins, shelves, cabinets, pallets, etc., that cannot be converted into a standardized MEU. We signed 7,484 weighted FASTBin and FASTVend devices in the third quarter of 2026. Our goal for weighted FASTBin and FASTVend device signings in 2026 is between 27,000 and 29,000 MEUs (our previous goal was between 28,000 and 30,000 MEUs). The second statistic is sales through FMI Technology, which combines the sales through FASTStock, FASTBin, and FASTVend. A portion of the growth in sales experienced by FMI, particularly FASTStock and FASTBin, reflects the migration of products from less efficient non-digital stocking locations to more efficient, digital stocking locations. The table below summarizes signings and installations of our FMI devices and sales through our FMI devices, eBusiness (1) tools, and Digital Footprint (2). | Nine-month Period | | Three-month Period | | 2026 | | | 2025 | | | DSRChange (3) | | | 2026 | | | 2025 | | | DSRChange (3) Weighted FASTBin/FASTVend signings (MEUs) | | 21,428 | | | 19,925 | | | 7.5 | % | | | 7,484 | | | 7,050 | | | 6.2 | % Signings per day | | 112 | | | 104 | | | | | | 117 | | | 110 | | | Weighted FASTBin/FASTVend installations (MEUs; end of period) | | | | | | | | 143,878 | | | 133,910 | | | 7.4 | % | | | | | | | | | | | FASTStock sales | $ | 873.6 | | | 777.2 | | | 12.4 | % | | $ | 294.2 | | | 274.8 | | | 7.0 | % % of sales | | 12.2 | % | | 12.4 | % | | | | | 11.7 | % | | 12.7 | % | | FASTBin/FASTVend sales | $ | 2,330.2 | | | 1,988.8 | | | 17.2 | % | | $ | 827.2 | | | 703.6 | | | 17.6 | % % of sales | | 32.6 | % | | 31.8 | % | | | | | 33.0 | % | | 32.6 | % | | FMI sales | $ | 3,203.8 | | | 2,766.0 | | | 15.8 | % | | $ | 1,121.3 | | | 978.4 | | | 14.6 | % FMI daily sales | $ | 16.8 | | | 14.5 | | | | | $ | 17.5 | | | 15.3 | | | % of sales | | 44.8 | % | | 44.3 | % | | | | | 44.8 | % | | 45.3 | % | | | | | | | | | | | | | eBusiness sales | $ | 2,082.2 | | | 1,868.3 | | | 11.4 | % | | $ | 721.5 | | | 628.7 | | | 14.8 | % % of sales | | 29.1 | % | | 29.9 | % | | | | | 28.8 | % | | 29.1 | % | | | | | | | | | | | | | Less: eBusiness and FMI sales overlap | $ | 884.7 | | | 817.8 | | | 8.2 | % | | $ | 306.4 | | | 283.3 | | | 8.2 | % % of sales | | 12.4 | % | | 13.1 | % | | | | | 12.2 | % | | 13.1 | % | | | | | | | | | | | | | Digital Footprint sales | $ | 4,401.2 | | | 3,816.5 | | | 15.3 | % | | $ | 1,536.5 | | | 1,323.8 | | | 16.1 | % % of sales | | 61.5 | % | | 61.1 | % | | | | | 61.4 | % | | 61.3 | % | | (1) | | Our eBusiness includes eProcurement activities, which are integrated transactions, including electronic data interchange (EDI), and eCommerce (transactional website sales). (2) | | Digital Footprint is a combination of our sales through FMI (FASTStock, FASTBin, and FASTVend) plus that portion of our eBusiness sales that does not represent billings of FMI services. (3) | | Weighted FASTBin/FASTVend signings and installations reflect the percent change compared to the same period in the prior year. Gross Profit Gross profit, as a percentage of net sales, decreased approximately 40 basis points to 44.8% in the third quarter of 2026 from 45.3% in the third quarter of 2025. A continued shift in customer mix toward larger customers reduced gross margin by approximately 50 basis points. While these relationships typically carry lower gross margins, they generate higher absolute profit dollars and are accretive to operating margin through fixed-cost leverage, higher volumes, and operating efficiencies. Price/cost reduced gross margin by approximately 30 basis points, an improvement of approximately 10 basis points from the second quarter of 2026. Gross margin benefited from several factors, including direct sourcing savings, supplier rebates, and tariff refunds. Approximately 20 basis points of the benefit reflected favorable timing. Our gross margin decreased approximately 75 basis points in the second quarter of 2026 to 44.6% of net sales, from 45.3% in the second quarter of 2025. Gross margin improved from the second quarter of 2026 to the third quarter of 2026. SG&A Expenses SG&A expenses, as a percentage of net sales, were 23.3% in the third quarter of 2026 versus 24.6% in the third quarter of 2025, an improvement of 130 basis points. Employee-related expenses, which typically represent 70% to 75% of total SG&A expenses, improved 90 basis points as a percentage of net sales in the third quarter of 2026 compared to the third quarter of 2025. Base pay leveraged through increased labor productivity, while bonuses and commissions grew faster than sales as a result of improved business activity and financial performance versus the same period in the prior year. Occupancy-related expenses, which typically represent 14% to 19% of total SG&A expenses, improved 50 basis points as a percentage of net sales in the third quarter of 2026 compared to the third quarter of 2025, driven mainly by fixed cost leverage. Combined, all other SG&A expenses, which typically represent 10% to 15% of total SG&A expenses, increased 10 basis points as a percentage of net sales when compared to the third quarter of 2025. This slight increase was driven mainly by higher fuel and general insurance expense, partially offset by increased joint marketing efforts with our suppliers. Operating Income Operating income as a percentage of net sales increased to 21.5% in the third quarter of 2026, compared to 20.7% in the third quarter of 2025. Net Interest Net interest income was $0.4 in the third quarter of 2026, compared to net interest expense of $0.9 in the third quarter of 2025, primarily from lower debt balances. Income Taxes We recorded income tax expense of $129.6 in the third quarter of 2026, or 24.4% of income before income taxes. Income tax expense was $105.1 in the third quarter of 2025, or 23.9% of income before income taxes. We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.6%. Net Income Net income was $401.6 in the third quarter of 2026, an increase of 19.7% compared to the third quarter of 2025. Diluted net income per share was $0.35 compared to $0.29 in the third quarter of 2025. CASH FLOW AND BALANCE SHEET Net cash provided by operating activities was $421.6 in the third quarter of 2026, an increase of 9.0% from the third quarter of 2025. Cash flow from operations represented 105.0% of net income, compared to 115.3% in the third quarter of 2025 and our five-year third quarter average of 101.1%. The decline as a percentage of net income compared to last year was primarily driven by a larger use of cash for accounts receivable and inventory, reflecting strong sales growth. This is a common dynamic for a distribution business. This was partially offset by higher accounts payable balances mainly attributable to an increase in inventory spending and an increase in accrued expenses related to incentive compensation and customer rebates from improved business performance. Net cash provided by operating activities was $1,065.7 in the first nine months of 2026, an increase of 14.9% from the first nine months of 2025, representing 94.8% of net income versus 96.2% in the first nine months of 2025 and the most recent five-year average of 96.4%. The decrease in operating cash flow, as a percent of net income, primarily reflects increased working capital associated with accounts receivable, which was partially offset by inventory efficiencies and higher payable balances due to increased purchasing activity. The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of September 30, 2026 when compared to September 30, 2025 were as follows: | | September 30 | Twelve-month Dollar Change | Twelve-month Percentage Change | | | 2026 | | 2025 | | | 2026 | | 2026 Accounts receivable, net | | $ | 1,615.2 | | 1,347.3 | | $ | 267.9 | | 19.9 | % Inventories | | | 1,776.6 | | 1,722.8 | | | 53.8 | | 3.1 | % Accounts payable | | | 445.8 | | 344.8 | | | 101.0 | | 29.3 | % Trade working capital, net | | $ | 2,946.0 | | 2,725.3 | | $ | 220.8 | | 8.1 | % | | | | | | | | Net sales in last three months | | $ | 2,463.3 | | 2,133.3 | | $ | 330.0 | | 15.5 | % The increase in our accounts receivable balance in the third quarter of 2026 was mainly attributable to sales growth, including relative growth with larger customers that tend to carry longer payment terms. The slight increase in our inventory balance in the third quarter of 2026, despite double-digit sales growth, reflects disciplined inventory management. The increase in our accounts payable balance in the third quarter of 2026 was mainly attributable to an increase in inventory spending to support growth. During the third quarter of 2026, our investment in property and equipment, net of proceeds from sales, was $71.8 (2.9% of net sales), which was an increase from $54.7 (2.6% of net sales) in the third quarter of 2025. The investment was directed toward facility construction and upgrades, industrial vending equipment, and information technology (IT) spend. Our five- and ten-year annual average as a percent of net sales was 2.5% and 3.1%, respectively. For 2026, we continue to expect our investment in property and equipment, net of proceeds from sales, to be between $310.0 and $330.0, an increase from $230.6 in 2025. The expected growth on a year-over-year basis reflects three items. First, we expect increased spending to replace our Atlanta hub facility and improve our picking capacity and efficiency across our hub network. Second, we expect elevated IT spending as projects that were expected in 2025 experienced delays and are expected to continue throughout 2026. Third, we expect increased trucking spend. During the third quarter of 2026, we returned $328.4, or 81.8% of net income, to our shareholders in the form of dividends ($298.2) and share repurchases ($30.2), compared to the third quarter of 2025 when we returned $252.5, or 75.3% of net income, in the form of dividends. Over the past five years, we have returned an average of 76.0% of net income to shareholders in the third quarter. Total debt on our balance sheet was $100.0 at the end of the third quarter of 2026, or 2.4% of total capital (the sum of stockholders' equity and total debt), compared to $195.0, or 4.8% of total capital, at the end of the third quarter of 2025. ADDITIONAL INFORMATION During the last twelve months, we increased our total full-time equivalent (FTE; based on 40 hours per week) employee headcount by 181. Our total FTE selling personnel decreased by 82, primarily driven by a drop in hours worked by part-time selling personnel. We increased our distribution and transportation FTE personnel by 105 to support increased product throughput at our distribution facilities. We increased our remaining FTE personnel by 158, which related primarily to personnel investments in supply chain support. The table below summarizes our absolute and FTE employee headcount at the end of the periods presented and the percentage change compared to the end of the prior periods. | | | | ChangeSince: | | | ChangeSince: | | | ChangeSince: | Q32026 | | Q22026 | Q22026 | | Q42025 | Q42025 | | Q32025 | Q32025 Selling personnel - absolute employee headcount | 17,117 | | 17,340 | -1.3 | % | | 17,166 | -0.3 | % | | 17,196 | -0.5 | % Selling personnel - FTE employee headcount | 15,332 | | 15,796 | -2.9 | % | | 15,439 | -0.7 | % | | 15,414 | -0.5 | % Total personnel - absolute employee headcount | 24,679 | | 24,795 | -0.5 | % | | 24,489 | 0.8 | % | | 24,438 | 1.0 | % Total personnel - FTE employee headcount | 21,749 | | 22,230 | -2.2 | % | | 21,602 | 0.7 | % | | 21,568 | 0.8 | % CONFERENCE CALL TO DISCUSS QUARTERLY RESULTS As we previously disclosed, we will host a conference call today to review the quarterly results, as well as current operations. This conference call will be broadcast live over the Internet at 9:00 a.m., central time. To access the webcast, please go to our Investor Relations website at https://investor.fastenal.com/events.cfm. ADDITIONAL MONTHLY AND QUARTERLY INFORMATION We publish on the 'Investor Relations' page of our website at www.fastenal.com both our monthly consolidated net sales information and the presentation for our quarterly conference call (which includes information, supplemental to that contained in our earnings announcement, regarding results for the quarter). We expect to publish the consolidated net sales information for each month, other than the third month of a quarter, at 6:00 a.m., central time, on the fourth business day of the following month. We expect to publish the consolidated net sales information for the third month of each quarter and the conference call presentation for each quarter at 6:00 a.m., central time, on the date our earnings announcement for such quarter is publicly released. FORWARD-LOOKING STATEMENTS Certain statements contained in this document do not relate strictly to historical or current facts. As such, they are considered 'forward-looking statements' that provide current expectations or forecasts of future events. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of terminology such as anticipate, believe, should, estimate, expect, intend, may, will, plan, goal, project, hope, trend, target, opportunity, continue, outlook, potential, would, could, and similar words or expressions, or by references to typical outcomes. Any statement that is not a historical fact, including estimates, projections, future trends, and the outcome of events that have not yet occurred, is a forward-looking statement. Our forward-looking statements generally relate to our expectations and beliefs regarding the business environment in which we operate, our projections of future performance, our perceived marketplace opportunities, our strategies, goals, mission, and vision, and our expectations about future capital expenditures, future investment in property and equipment, future tax rates, future inventory levels, the declaration and payment of dividends, pricing, weighted FMI device signings, the impact of inflation on our cost of goods sold or SG&A expenses, the impact of price increases on overall sales growth or margin performance, and our ability to grow our business through the enhancement of sales through our Digital Footprint. Readers should understand that forward-looking statements involve a variety of risks and uncertainties, known and unknown (including risks disclosed in our most recent annual and quarterly reports), and may be affected by inaccurate assumptions. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially. Factors that could cause our actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those detailed in our most recent annual and quarterly reports. Each forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any such statement to reflect events or circumstances arising after such date. FAST-E FASTENAL COMPANY Condensed Consolidated Balance Sheets (Amounts in millions except share and per share information) (Unaudited) | | | | | | | | Assets | | September 30, 2026 | | December 31, 2025 Current assets: | | | | Cash and cash equivalents | | $ | 211.9 | | | 276.8 | Trade accounts receivable, net of allowance for credit losses of $6.2 and $5.3, respectively | | | 1,615.2 | | | 1,245.3 | Inventories | | | 1,776.6 | | | 1,748.0 | Prepaid income taxes | | | 9.3 | | | 20.1 | Other current assets | | | 215.8 | | | 181.9 | Total current assets | | | 3,828.8 | | | 3,472.1 | | | | | Property and equipment, net | | | 1,188.2 | | | 1,131.6 | Operating lease right-of-use assets | | | 343.4 | | | 309.0 | Other assets | | | 134.1 | | | 140.2 | | | | | Total assets | | $ | 5,494.4 | | | 5,052.9 | | | | | Liabilities and Stockholders' Equity | | | | Current liabilities: | | | | Current portion of debt | | $ | 50.0 | | | 25.0 | Accounts payable | | | 445.8 | | | 316.8 | Accrued expenses | | | 335.5 | | | 264.7 | Current portion of operating lease liabilities | | | 113.5 | | | 106.1 | Income taxes payable | | | 29.4 | | | 3.0 | Total current liabilities | | | 974.2 | | | 715.6 | | | | | Long-term debt | | | 50.0 | | | 100.0 | Operating lease liabilities | | | 238.2 | | | 210.8 | Deferred income taxes | | | 65.9 | | | 67.4 | Other long-term liabilities | | | 16.9 | | | 15.5 | | | | | Stockholders' equity: | | | | Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding | | | — | | | — | Common stock: $0.01 par value, 1,600,000,000 shares authorized, 1,147,264,610 and 1,148,057,473 shares issued and outstanding, respectively | | | 11.5 | | | 11.5 | Additional paid-in capital | | | 60.0 | | | 115.5 | Retained earnings | | | 4,142.8 | | | 3,867.7 | Accumulated other comprehensive loss | | | (65.0 | ) | | (51.1 | ) Total stockholders' equity | | | 4,149.2 | | | 3,943.6 | Total liabilities and stockholders' equity | | $ | 5,494.4 | | | 5,052.9 | FASTENAL COMPANY Condensed Consolidated Statements of Income (Amounts in millions except income per share) (Unaudited) | | | | | | | | | | | Nine Months EndedSeptember 30, | | Three Months EndedSeptember 30, | | 2026 | | | 2025 | | | | 2026 | | | 2025 | Net sales | $ | 7,051.9 | | | 6,173.1 | | | $ | 2,463.3 | | | 2,133.3 | Cost of sales | | 3,900.6 | | | 3,380.6 | | | | 1,358.6 | | | 1,167.5 | Gross profit | | 3,151.3 | | | 2,792.5 | | | | 1,104.7 | | | 965.8 | | | | | | | | Selling, general, and administrative expenses | | 1,671.1 | | | 1,521.1 | | | | 573.9 | | | 524.3 | Operating income | | 1,480.2 | | | 1,271.4 | | | | 530.8 | | | 441.5 | | | | | | | | Interest income | | 4.3 | | | 4.3 | | | | 1.2 | | | 0.7 | Interest expense | | (2.9 | ) | | (5.3 | ) | | | (0.8 | ) | | (1.6 | ) Income before income taxes | | 1,481.6 | | | 1,270.4 | | | | 531.2 | | | 440.6 | | | | | | | | Income tax expense | | 357.4 | | | 306.0 | | | | 129.6 | | | 105.1 | Net income | $ | 1,124.2 | | | 964.4 | | | $ | 401.6 | | | 335.5 | | | | | | | | Basic net income per share | $ | 0.98 | | | 0.84 | | | $ | 0.35 | | | 0.29 | Diluted net income per share | $ | 0.98 | | | 0.84 | | | $ | 0.35 | | | 0.29 | | | | | | | | Basic weighted average shares outstanding | | 1,147.6 | | | 1,147.4 | | | | 1,147.2 | | | 1,147.9 | Diluted weighted average shares outstanding | | 1,150.4 | | | 1,150.3 | | | | 1,150.1 | | | 1,151.0 | FASTENAL COMPANY Condensed Consolidated Statements of Cash Flows (Amounts in millions) (Unaudited) | | | | | | | | Nine Months EndedSeptember 30, | | Three Months EndedSeptember 30, | | 2026 | | | 2025 | | | | 2026 | | | 2025 | Cash flows from operating activities: | | | | | | | Net income | $ | 1,124.2 | | | 964.4 | | | $ | 401.6 | | | 335.5 | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | Depreciation of property and equipment | | 126.9 | | | 126.7 | | | | 42.1 | | | 42.3 | Loss (gain) on sale of property and equipment | | 0.1 | | | (2.6 | ) | | | (0.1 | ) | | (1.0 | ) Bad debt expense | | 4.2 | | | 3.5 | | | | 0.9 | | | 1.6 | Deferred income taxes | | (1.4 | ) | | (6.1 | ) | | | 0.2 | | | (7.4 | ) Stock-based compensation | | 7.8 | | | 6.2 | | | | 2.6 | | | 2.1 | Amortization of intangible assets | | 8.2 | | | 8.0 | | | | 2.8 | | | 2.7 | Changes in operating assets and liabilities: | | | | | | | Trade accounts receivable, net | | (379.1 | ) | | (233.2 | ) | | | (58.9 | ) | | (26.8 | ) Inventories | | (34.2 | ) | | (66.3 | ) | | | (41.9 | ) | | 1.4 | Other current assets | | (34.4 | ) | | 5.9 | | | | (36.8 | ) | | (19.8 | ) Accounts payable | | 127.5 | | | 50.3 | | | | 43.4 | | | 25.6 | Accrued expenses | | 77.4 | | | 35.4 | | | | 48.7 | | | 5.4 | Income taxes | | 37.2 | | | 34.8 | | | | 13.0 | | | 22.3 | Other | | 1.4 | | | 0.8 | | | | 3.9 | | | 3.0 | Net cash provided by operating activities | | 1,065.7 | | | 927.8 | | | | 421.6 | | | 386.9 | | | | | | | | Cash flows from investing activities: | | | | | | | Purchases of property and equipment | | (197.0 | ) | | (185.3 | ) | | | (74.0 | ) | | (60.3 | ) Proceeds from sale of property and equipment | | 7.0 | | | 12.5 | | | | 2.2 | | | 5.6 | Other | | (2.1 | ) | | (0.3 | ) | | | (0.2 | ) | | (0.1 | ) Net cash used in investing activities | | (192.1 | ) | | (173.1 | ) | | | (72.0 | ) | | (54.8 | ) | | | | | | | Cash flows from financing activities: | | | | | | | Proceeds from debt obligations | | 722.0 | | | 1,040.0 | | | | 315.0 | | | 365.0 | Payments against debt obligations | | (747.0 | ) | | (1,045.0 | ) | | | (335.0 | ) | | (400.0 | ) Proceeds from exercise of stock options | | 17.5 | | | 23.9 | | | | 7.2 | | | 6.6 | Purchases of common stock | | (80.8 | ) | | — | | | | (30.5 | ) | | — | Cash dividends paid | | (849.1 | ) | | (751.6 | ) | | | (298.2 | ) | | (252.5 | ) Net cash used in financing activities | | (937.4 | ) | | (732.7 | ) | | | (341.5 | ) | | (280.9 | ) | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | (1.1 | ) | | 10.3 | | | | (1.0 | ) | | (0.9 | ) | | | | | | | Net (decrease) increase in cash and cash equivalents | | (64.9 | ) | | 32.3 | | | | 7.1 | | | 50.3 | | | | | | | | Cash and cash equivalents at beginning of period | | 276.8 | | | 255.8 | | | | 204.7 | | | 237.8 | Cash and cash equivalents at end of period | $ | 211.9 | | | 288.1 | | | $ | 211.9 | | | 288.1 | | | | | | | | Supplemental information: | | | | | | | Cash paid for interest | $ | 2.9 | | | 5.7 | | | $ | 0.9 | | | 1.5 | Net cash paid for income taxes | $ | 317.4 | | | 274.4 | | | $ | 114.4 | | | 89.1 | Leased assets obtained in exchange for new operating lease liabilities | $ | 122.0 | | | 109.5 | | | $ | 58.9 | | | 36.4 | View source version on businesswire.com: https://www.businesswire.com/news/home/20261013629380/en/ Contacts Dray Schreiber Accounting Manager 507.313.7324

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Achieved the largest year-over-year increase in quarterly operating income in company history, driven by growth acceleration and margin expansion. - Market share gains were primarily fueled by a key account strategy, with sales from sites spending over $50,000 monthly increasing roughly 28%. - Digital Footprint reached 61.4% of sales, enhancing customer integration and operational efficiency through automated replenishment and reduced manual labor. - Growth significantly outpaced industrial market averages, particularly in heavy manufacturing, which management cites as clear evidence of competitive share gains. - Strategic focus on 'embedded supply solutions' like FMI technology (FASTBin/FASTVend) is deepening customer retention and creating long-term cost-saving opportunities. - Operational leverage was achieved by growing sales 15.5% while keeping full-time equivalent headcount growth below 1% through role specialization and AI-driven tools. - Management targets 27,000 to 29,000 weighted FMI device signings for the full year to continue moving customers toward technology-enabled replenishment. - Guidance assumes a continued focus on price/cost neutrality, with management expecting sequential improvement to continue into early 2027. - Capital spending for full year 2026 is projected at $310 million to $330 million, prioritized for hub capacity, automation, and IT projects. - The growth framework assumes that as pricing tailwinds moderate, volume gains and deeper penetration within large accounts will become the primary revenue drivers. - Management maintains an internal accountability goal of 10 percentage point top-line improvement annually, supported by mid-20s incremental operating margins. - Gross margin faced a 50-basis-point headwind from customer mix, reflecting the lower-margin but higher-volume profile of large national accounts. - A 40-basis-point gross margin benefit from favorable items (tariff refunds and supplier rebates) included 20 basis points of timing that is not expected to recur in Q4. - Price/cost remained a 30-basis-point headwind, though it improved 10 basis points sequentially as the company laps aggressive 2025 pricing actions. - Acquired a small AI-related company to enhance technology orchestration and accelerate internal development of sales and sourcing tools. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management clarified that 20 basis points of the Q3 margin benefit were timing-related, specifically tariff refunds and supplier volume rebate catch-ups. - They expect the underlying mix headwind to remain around 50-60 basis points but noted that Q4 will lap a significant negative timing event from the prior year. - Data centers currently contribute approximately 4 to 5 percentage points to overall growth, spanning construction contractors and equipment manufacturers. - Fastenal is utilizing 'pods' (mobile on-site units) to keep pace with the rapid demand and high-speed service requirements of these facilities. - The decline in sales force headcount is not a 'cut' but a structural shift enabled by AI tools that reduce quoting time from days to minutes. - Management stated they are no longer required to add headcount linearly with new contract wins due to increased digital efficiency and role specialization.