Fastenal reported third-quarter results on Wednesday morning, October 14. Sales were $2,463.3 million, up 15.5%, and operating income rose 20.2% to $530.8 million. Net income was $401.6 million, or $0.35 per share - up 19.7% and 19.8%.
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What was reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Net sales | 2,463.3 | 2,133.3 | +15.5% |
| Daily sales (per business day) | 38.5 | 33.3 | +15.5% |
| Gross profit | 1,104.7 | 965.8 | +14.4% |
| Gross margin | 44.8% | 45.3% | -0.42 pts |
| Selling, general and administrative expenses (SG&A) | 573.9 | 524.3 | +9.4% |
| Operating income | 530.8 | 441.5 | +20.2% |
| Operating margin | 21.5% | 20.7% | +0.85 pts |
| Pre-tax income | 531.2 | 440.6 | +20.6% |
| Net income | 401.6 | 335.5 | +19.7% |
| Diluted EPS (dollars) | 0.35 | 0.29 | +19.8% |
| Operating cash flow | 421.6 | 386.9 | +9.0% |
In millions of dollars, except per-share amounts and ratios. Each of the two quarters had 64 business days. Changes in the ratios are computed from the amounts in the table without rounding the ratios themselves; the company reports an operating margin improvement of 90 basis points. Source: the company's results release, October 14, 2026.
EPS is on a GAAP basis, and the company does not report adjusted earnings. In the first nine months of the year sales rose 14.2% to $7,051.9 million, and net income rose 16.6% to $1,124.2 million, or $0.98 per share against $0.84.
Sales: pricing, end markets and large customers
Daily sales rose 15.5% to $38.5 million, from $33.3 million a year ago. Pricing contributed about 240 basis points of growth (a year ago: 240 to 270), and currency subtracted about 10. The release gives no organic or operational growth figure, so the rest of the growth cannot be broken down from it.
Growth was broad, but not even. Heavy manufacturing, which is 44.6% of sales, grew 20.2% in daily sales. Other manufacturing grew 13.2%, non-residential construction 12.0% and all other end markets 12.4%. By customer type, contract customers (76.5% of sales) grew 18.8% and non-contract customers 7.8%. By product type, direct materials grew 18.6% and indirect materials 14.3%.
Large customers stood out. The number of sites spending at least $50,000 a month rose to 3,288 from 2,771 a year ago (up 18.7%, by my computation), and sales from them jumped from $1,141.9 million to $1,456.6 million - up 27.6%, by my computation. Sales through the company's Digital Footprint rose 16.1% to $1,536.5 million.
Margins: gross fell, operating rose
Gross profit rose 14.4% to $1,104.7 million, less than sales, and the gross margin fell to 44.8% from 45.3% a year ago (it was 44.6% in the second quarter). The release says the gross margin benefited from direct sourcing savings, supplier rebates and tariff refunds, and that about 20 basis points of that was favorable timing - roughly $5 million, by my computation. The release flags no reserves, legal charges, restructuring or unusual tax items.
Expenses rose 9.4% to $573.9 million, and their share of sales fell to 23.3% from 24.6%. The entire improvement in operating margin came from expenses, not from gross profit: the expense ratio fell by more than the gross margin did, and operating income rose 20.2% to $530.8 million. The operating margin reached 21.5% of sales, against 20.7%.
The company presents the improvement as 90 basis points. A computation from the reported amounts gives 85, and the difference between the two rounded margins in the table is 80 - the gap is rounding.
Below the operating line: net interest was income of $0.4 million, against an expense of $0.9 million a year ago, and the effective tax rate rose to 24.4% from 23.9% (the company expects an ongoing rate of about 24.6%). Net income rose 19.7% to $401.6 million, or 16.3% of sales against 15.7% a year ago, by my computation.
What management said on the call
This section relies on an automated transcript of the company's call with analysts (Benzinga), which is not a primary source and carries its own accuracy disclaimer. The release itself contains no management quote, sales guidance or earnings guidance.
CEO Jeff Watts said on the call: "Sales grew 15.5%. Earnings grew faster than sales." According to him, growth accelerated and was turned into a higher operating margin, thanks to share gains at key accounts and new contract wins.
CFO Max Tunnicliff detailed the factors that acted on the gross margin: customer mix that subtracted about 50 basis points and price-cost that subtracted about 30, with price-cost improving by about 10 basis points from the second quarter. About 10 basis points of the favorable items were tariff refunds, which he does not expect to repeat materially in the fourth quarter, and the rest of the favorable items was a catch-up of supplier volume rebates.
The company does not give quarterly guidance. The only monthly reading provided was for September: daily sales growth was 14.4%, below July and August. Management called it a moderation and said it sees no change in its share gains. As for the fourth quarter, the CFO said price-cost should not widen, and that mix would be a headwind of 50 to 60 basis points on the gross margin year over year - but that lapping the roughly 50 basis points of negative timing in the fourth quarter of 2025 would offset it, according to him.
What the report says about US industry
Fastenal sells to industry and construction, so its report gives a partial read on demand there. Partial, because these are the customers of one company, and its growth combines pricing, share gains and new contracts.
What stands out in the numbers: heavy manufacturing grew 20.2%, other manufacturing 13.2% and non-residential construction 12.0%, while pricing explained only about 240 basis points of the 15.5%. On the other side, non-contract customers grew 7.8% - less than half the pace of contract customers - and September growth slowed to 14.4%. The report shows no organic growth, so there is a limit to what can be concluded from it about industrial activity itself.
Capital, capital expenditure and targets
Operating cash flow rose 9.0% to $421.6 million, 105.0% of net income (115.3% a year ago). Net capital expenditure was $71.8 million, 2.9% of sales, so free cash flow was about $350 million - 87% of net income. Shareholders received $328.4 million, 81.8% of net income: $298.2 million in dividends and about $30 million in buybacks. Total debt stands at $100.0 million, against $195.0 million in the report's comparison column, and cash at $211.9 million.
On guidance: 2026 net capital expenditure remained in a range of $310 to $330 million ($230.6 million in 2025). The weighted FASTBin and FASTVend signings goal was lowered to 27,000-29,000 units (MEU), from 28,000-30,000. In the third quarter, 7,484 units were signed.
Against expectations, and the stock
EPS of $0.35 was a cent above the $0.34 expectation (six analysts in the AP/Zacks summary published by Yahoo Finance; the same number appears in the StockStory summary). On revenue there is a conflict between the two consensus summaries that Yahoo Finance hosts: $2.49 billion in the AP/Zacks summary, under which revenue was about 1.1% below expectations, and $2.44 billion in the StockStory summary, a figure also cited by Benzinga, MarketBeat and Investing.com, under which it was about 0.9% above. In other words, whether revenue beat or missed depends on which consensus is chosen.
Morning reports described a different reaction from the close. Pre-market showed weakness of about 3%, and in the first hours after the release Yahoo Finance and Benzinga reported declines of 3.1% and 4.18%. The stock reversed and closed at $52.00, up 1.1% from the previous close ($51.43), near its 52-week high. Since the start of the year the stock is up 29.6%, by my computation from Yahoo Finance data.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What interested me in this report is where the profit came from. The gross margin fell year over year and the operating margin rose, meaning the entire improvement came from expenses growing 9.4% while sales grew 15.5%. That is operating leverage, and it holds as long as sales keep growing faster than expenses.
There are two ways to read it. One: growth of 15.5% led by heavy manufacturing and contract customers, together with a better margin, shows a company that knows how to turn sales into profit. The other: the quarter was helped by favorable items in the gross margin, some of them timing and tariff refunds that are not supposed to repeat, daily growth slowed to 14.4% in September, and the signings goal was lowered. The same numbers support both readings, and the stock, which traded down in the morning and closed up, did not decide between them.
What I will follow next quarter: the pace of daily sales after September, and the gross margin without the timing and without the tariff refunds. That is where it will become clear how much of the operating improvement remains.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
