The industrial sector is the backbone of the U.S. economy. Thanks to sustained demand and consumer spending, the sector has been recovering at an accelerated pace since last year. Manufacturing output rose 1.2% sequentially in February, surpassing Reuters’ 0.6% improvement consensus estimate. On a year-over-year basis, manufacturing output rose 7.4% in February 2022.
With a mending economy, the industrial sector is projected to do well in the coming months. Businesses are increasing their spending to support increasing production and to meet the strong demand in the manufacturing, construction, commercial, and transportation market segments. These industries are adopting digital technology to bring operational efficiencies to scale and to promote sustainability by using clean fuels and green practices.
Given the impressive industry growth prospects, we think it may be profitable to invest in quality industrial distribution stocks Fastenal Company (FAST) and W.W. Grainger, Inc. (GWW).
Click here to check out our Industrial Sector Report for 2022
Fastenal Company (FAST)
FAST distributes industrial and construction supplies in the U.S., Canada, Mexico, North America, and internationally. The Winoma, Minn., company provides fasteners and related industrial and construction supplies under the Fastenal name. FAST also offers miscellaneous supplies and hardware. It serves the manufacturing market, non-residential construction market, mining companies, retail trades, oil exploration, and refinement companies.
In 2021, FAST signed 274 new onsite locations, which included 44 signings in the fourth quarter of 2021. By December 31, FAST had 1,416 active sites, representing an increase of 11.9% from the prior year. This development has boosted the company’s sales as the business activity improved from FAST’s onsite customers.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, FAST's net sales increased 12.8% year-over-year to $1.53 billion. Its gross profit improved 15.2% from the prior-year period to $712.90 million. The company’s operating income increased 13.8% year-over-year to $300.90 million. FAST’s net earnings rose 17.9% year-over-year to $231.20 million, and the company's net earnings per share rose 17.6% year-over-year to $0.40.
The $1.68 billion consensus revenue estimate for its fiscal year 2022 first quarter, ended March 31, 2022, represents 18.4% growth from the same period in 2021. The $0.44 consensus EPS estimate for the to-be-reported quarter indicates a 20% year-over-year rise. It is no surprise that FAST has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained 11.1% in price over the past month and 17.3% over the past year. It closed yesterday's trading session at $60.15.
FAST's POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
FAST has a B grade for Stability, Quality, and Momentum. Within the Industrial - Equipment industry, it is ranked #39 of 90 stocks.
To see additional POWR Ratings (Growth, Value, and Sentiment) for FAST, click here.
W.W. Grainger, Inc. (GWW)
GWW is a leading broad line distributor with operations primarily in North America, Japan, and the United Kingdom. The Lake Forest, Ill., company also delivers services and solutions that include technical support and inventory management. GWW serves businesses, corporations, and government entities through sales, service representatives, and electronic and e-commerce channels. The company operates through two segments: High-Touch Solutions N.A.; and Endless Assortment.
In January, GWW declared a $1.62 per share cash dividend, which was paid to the shareholders on March 1, 2022. This reflects the company’s strong financial performance and ability to return cash to the shareholders.
GWW's adjusted net sales increased 14% year-over-year to $3.36 billion in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. Its adjusted gross profit grew 22% year-over-year to $1.25 billion. GWW’s adjusted operating earnings improved 41% year-over-year to $417 million. Its adjusted net earnings increased 43% from its year-ago value to $283 million. And the company’s adjusted earnings per share rose 49% year-over-year to $5.44.
Analysts expect GWW's revenue for its fiscal 2022 first quarter, ended March 31, 2022, to come in at $3.50 million, representing a 13.5% rise year-over-year. The Street expects the company's EPS for the to-be-reported quarter to come in at $6.08, representing a 35.6% increase year-over-year. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of GWW increased 6% in price over the past month and 27.2% over the past year. They closed yesterday's trading session at $519.33.
GWW's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
GWW has a B grade for Momentum, Growth, Quality, and Stability. Within the Industrial - Equipment industry, it is ranked #12 of 90 stocks.
To see additional POWR Ratings (Value and Sentiment) for GWW, click here.
Click here to check out our Industrial Sector Report for 2022
FAST shares were trading at $59.89 per share on Tuesday afternoon, down $0.26 (-0.43%). Year-to-date, FAST has declined -6.00%, versus a -4.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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