Fastenal Co.

Strong quarter: share-led growth + faster earnings growth - Net sales $2.46B, up 15.5% YoY (+$330M). - Operating margin 21.5%, up 90 bps; Operating income +$90M (described as the largest single-quarter YoY increase in Fastenal history). - ROIC 32.5%, up 230 bps. - Management emphasized the quarter was mainly driven by market share gains via key account strategy + new contract wins, not just macro.

Demand backdrop improving, but growth still outpacing the industrial market - Industrial conditions improved; field feedback matched results. - U.S. manufacturing PMI averaged ~55; industrial production for key end markets stayed positive. - Daily sales growth 15.5% (up from 14.7% in Q2). - Growth leadership: - Heavy manufacturing ~45% of sales, with daily sales ~20% growth. - Data centers and other high-demand markets called out as strong. - Direct materials up ~19% vs indirect ~14% (reflects stronger production activity, large customer signings, availability, and pricing actions).

Margins: gross margin down YoY, but operating leverage and “run-rate” clarity were key - Gross margin about 45%, down 40 bps YoY (but +20 bps vs Q2). - Management attributed the gross margin gap to: - Mix (~50 bps headwind) from growth with larger customers (lower gross margin but strong operating economics and attractive incremental profit). - Price/cost (~30 bps headwind)—but improving ~10 bps sequentially. - Favorable items (~40 bps) largely from direct sourcing savings, supplier rebates, tariff refunds; management cautioned not all is repeatable (timing).