Construction and industrial supplies producer Fastenal Company (Ticker Symbol: FASTWealth Strength IndexAAPL is Extremely Up and trending Up) reported earnings that came in better than the street was anticipating. The Winona, Minn.- based company reported an earnings per share beat of .37 cents vs. Wall Street analysts’ expectations of .35 cents per share. Fastenal reported a revenue beat of $1.38 billion, which was better than Wall Street analysts’ expectations by 0.31%. The company has now beaten consensus revenue estimates for three of the last four quarters.
Fastenal’s board of directors declared a dividend of .22 cents to be paid to shareholders of record at the close of Oct. 25, 2019. The dividend will be paid in cash on Nov. 22, 2019. The company began paying dividends annually in 1991, semi-annual in 2003, and quarterly dividends in 2011.
The above image is the past four years of Fastenal’s stock price. The company started out in the first quarter of 2016 with a v-shaped reversal pattern. That was short-lived and the stock retraced back, finding some support just under the $19.00 price level. Fastenal continued to trade uneventfully within its range while putting in a bullish divergence pattern in the second and third quarters of 2017. A bullish divergence pattern is where the stock makes a lower low in price but the Relative Strength Index makes a higher low (as indicated on the chart by the red lines). Traders and investors sometimes look at divergences for a possible pause within the current trend, which can at times lead to a reversal, as occurred in Fastenal’s case.
The stock proceeded to trade higher until the beginning of 2018. Throughout the rest of 2018, the stock began to trade in a year-long horizontal channel. Horizontal channels are usually viewed as continuation patterns and are areas of indecisiveness between buyers and sellers. The stock is a point at which supply and demand are relatively balanced and a stock’s price trades within a certain range. Usually, the same highs and lows are tested multiple times within the horizontal channel before a break out in either direction. Fastenal broke out of its channel to the upside. The stock then pulled back slightly finding some price support just under its 200-day moving average. Fastenal traded to an all-time high today on the news of its earnings and dividend announcement at $36.51.
(Chart above courtesy of www.tipranks.com)
Based on a survey of four analysts offering 12-month price targets, the average price target for Fastenal’s stock is $32.00. According to that number, the stock is priced at a premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $36.12.
The stock market is up overall today on news that expectations of a limited US-China trade deal may happen soon, which has helped boost Fastenal’s stock price.
Investors in Fastenal should look to their next earnings release on Jan. 19, 2020 for fresh news within the company.