Stock of the Day
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Fastnel (FAST)
Fastnel Misses Wall Street's Expectations Again
Fastnel (FAST: Charts, News, Offers) reported a 43% drop in its second quarter earnings. The construction supplies company watched its net income plummet to $43.5 million from $76.2 million a year ago. Fastnel's sub-par quarter performance marks the second straight quarter that it has failed to meet Wall Street's expectations. What is the cause of Fastnel's recent slump? How is this performance going to impact its future?
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| Stock Analysis |
Fastnel's declining sales is the primary factor behind its disappointing quarter performance. The construction wholesaler, best known for manufacturing screws and bolts, experienced a 21% drop in sales during the second quarter. The weaker economy has really hurt the construction industry, and is making things extremely difficult for Fastnel. Fastnel's biggest concern is with its declining business activity with manufacturing companies. Historically, the manufacturing customer segment represented 45% to 50% of Fastnel's total sales. Now, the manufacturing customers produce approximately 28% of Fastnel's sales. Fastnel has identified the reasons for its current situation, but how is this affecting its future?
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Fastnel has been forced to cut its work force due to its recent company performance and today's struggling economy. During the quarter, the construction supplies company slashed 270 jobs. Fastnel has reduced its number of employees from 13,000 to 12,470 since the beginning of 2009. In addition, the bolts and screw manufacturer has seen a drop off in its recent expansion efforts. Even though Fastnel is still opening new stores, its growth rate is slowly declining. Fastnel opened 112 new stores this time last year, but it only managed to open 42 stores this quarter.
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Overall, Fastnel has taken quite a big hit during these last two quarters. The recent recession has really put a squeeze on Fasntel's sales, and has forced it to re-evaluate its current situation. Fastnel realizes that manufacturing segment will not produce like it did in the past, and it has been making a strong effort to increase business with resellers, government projects, and in-store retail sales. Fastnel is hoping that a shift in its customer segment focus and massive budget cut backs will help turnaround its profit margin. However, only time will tell if Fastnel's strategic remodeling efforts will be enough to repair the damages done from past quarter performances.
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Profile |
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