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Fastenal Company (FAST) shares rose more than 10% on Wednesday after the company reported better-than-expected second quarter financial results. Revenue rose 13.4% to $1.27 billion – beating consensus estimates by $10 million – and net income rose nearly 42% to 74 cents per share, which beat consensus estimates by eight cents per share.
In addition to its strong fastener and non-fastener sales growth, the company signed 81 new on-site locations – compared with just 68 signings during the comparable period a year ago – and repurchased 800,000 shares of common stock at an average price fo $50.51 per share. The company also declared a dividend of 40 cents per share on July 10 that continues to attract income investors to the stock. (See also: Fastenal Co. Reports Results for the Quarter Ended in June – Earnings Summary.)
From a technical standpoint, the stock broke out from trendline and R1 resistance at around $52.69 to retest prior highs at around $54.50. The relative strength index (RSI) rose near overbought levels at 68.36, but the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock could see some near-term profit taking but ultimately continue its move higher.
Traders should watch for a breakout from trendline resistance at $54.50 to R2 resistance at $57.26 or prior highs at around $58.00. If the stock breaks lower, the stock could retest trendline and R1 support levels at $52.69 or even test the 50- and 200-day moving average at around $51.50. However, technical indicators suggest that the stock will continue its move higher following the bullish fundamental developments. (For additional reading, check out: Q2 Earnings Poised for Best Growth Since 2010.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.