Fastenal Reports Q3 2026 Sales Growth of 15.5% and Earnings Growth

Fastenal (NASDAQ: FAST ) reported third-quarter financial results on Wednesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

5% and earnings growth exceeding sales. 46 billion, with a notable operating income increase marking the largest year-over-year rise in a single quarter. Strategic initiatives focused on expanding market share through key account strategies and new contract wins, alongside investments in digital tools like FASTBin and FASTVend to enhance customer retention and operational efficiency. 5%.

The company demonstrated effective cost management, achieving significant SG&A leverage. 4% of total sales, and the company continues to drive customer engagement through technology-enabled services. Management emphasized strong performance across heavy manufacturing and construction sectors, along with continued share gains and embedded supply solutions. The company maintained disciplined capital management, with operating cash flow at 105% of net income and substantial returns to shareholders through dividends and share repurchases.

Future outlook remains positive with expectations for continued growth driven by technology integration and strategic customer partnerships, though price-cost management remains an area of focus. Full Transcript OPERATOR Greetings. Welcome to Fastenal's 2026 Third Quarter Earnings Results conference call. At this time, all participants are in listen-only mode.

The question-and-answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. Please note that today's conference is being recorded. At this time, I'll now turn the conference over to Dre Schreiber.

Thank you, Dre. You may begin. Dre Schreiber, Investor Relations 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 Tunnicliffe, 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, submission, or distribution of today's call is permitted without Fastenal's consent. 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. Jeff Watts, President and Chief Executive Officer Thank you, Dre.

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 Tunnicliffe, 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 Onsites, our distribution centers, our trucks, and our 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, to the blue team, thank you.

This was a very strong quarter, and one you should 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 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 and take about the same number of questions as usual.

Now onto the quarter, and for me I think the headline's pretty simple. 5%. Earnings grew faster than sales. 46 billion, up 330 million from last year.

5, up 90 basis points. 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 three things that really stood 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 five. This really brings us back to our three strategic objectives. These are the same pillars we've discussed before and everything we do ties back to them.

First, increasing sales effectiveness. We're gaining share with larger customers through our key account strategy and new contract wins. You can see that in our daily sales growth and in the growth of our largest customer sites and services. We continue to grow our FMI installed base, our FASTBin and FASTVend technology, our digital footprint.

These tools improve the customer experience, they strengthen retention, and make both our customers' and our own operations much more efficient. Then lastly, expanding our TAM. 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.

Really, the strategy is consistent. What changes quarter to quarter is the evidence, and this quarter I believe the evidence was strong. Now on to slide six 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.

4% from last year with signings weighted toward multi-site national accounts. The number of sites spending 50k 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%. 8%. 4% to growth.

That's a slower pace than earlier in the year because the year-over-year pricing contribution peaked between 4Q25 and 1Q26. 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 clearest signal that we're taking share.

Now on to slide 7. 4% of sales and digital sales grew approximately 16% on a daily basis, faster than the company overall. Now, 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.

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 device signings for the full year. We really believe that the 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. In this example, we had a new customer that was 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 mapped the process and identified the root cause, which was a manual, inconsistent system with limited automation, limited digital visibility, and physical organization. From there we developed a roadmap to modernize their supply chain, and once improved, our team moved quickly. As you can see on slide 9, we 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 FAST360 to 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. 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.

The 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, Chief Financial Officer 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. 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. 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. 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, machined 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 non-manufacturing 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. 5%, as 130 basis points of SG&A leverage more than offset a 40 bp 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, two items were discussed 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 is 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, 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 4Q25 and 1Q26. We will continue to report on price-cost while it remains a headwind, and we remain focused on disciplined pricing and turning 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, on-site, 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. 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 and a half on a trailing twelve-month basis, comparing that with a ten-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. 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 to 330 million. The program includes hub network capacity, FMI and automation equipment, information technology projects, and transportation assets.