Fastenal Company

Q3 performance beat (top-line + faster earnings growth): strong share gains - Net sales: $2.46B, +15.5% YoY (+$330M). - Operating margin: 21.5%, +90 bps YoY; ROIC: 32.5%, +230 bps YoY. - Operating income: +$90M YoY—described as the largest year-over-year quarterly increase in Fastenal’s history. - Management attributes growth primarily to market share gains from the key account strategy and new contract wins (not just pricing or general market tailwinds).

Customer/contract momentum is a key driver (evidence that growth is “real”): - Contract customers = 76%+ of sales, with daily sales +18.8% from those customers. - Contract count: +6.4% YoY, with signings weighted toward multi-site national accounts. - $50k+/month sites: ~+19% (from ~2,800 to ~3,300); sales from these sites +~28%. - Digital + tech traction: Digital footprint ~61.4% of sales, with digital sales +~16% daily vs company overall. - FMI devices: ~7,500 weighted devices signed in the quarter (~117/day); installed base >143,000 units (+7%); FASTBin/FASTVend sales +~18%. - Expectations for the year: 27,000–29,000 weighted FMI device signings (unchanged).

Margins: good operating leverage, but investors should watch gross-margin headwinds - Operating margin expansion driven by SG&A leverage (+130 bps) more than offsetting gross margin decline (~-40 bps YoY). - Gross margin down ~40 bps YoY, primarily due to: - Customer mix headwind (~50 bps): growth with larger customers (generally lower gross margin) but supports strong operating profitability overall. - Price/cost headwind (~30 bps): management says it’s improving ~10 bps sequentially; price/cost contribution slowing as they lap strong pricing in Q4’25–Q1’26. - One-time/benefit items added ~40 bps to gross margin (direct sourcing savings, supplier rebates, tariff refunds), but management cautions ~half is timing and may not persist.