A primary catalyst for growth has been its strategy to ramp up its Onsite and vending business lines, both of which bring its products to the builders' work sites.
April's performance looks to be a continuation of this positive growth trend, but shares are sinking lower by nearly 5% on the session.
There are a few possible explanations for the weakness. First, it's important to realize that this April had one more business day (22 vs. 21) than the year ago period. In order to adjust for the difference, FAST also provides several "daily sales" revenue metrics.
On that basis, its growth pencils out to a more modest +7.4% yr/yr which was below its recent trend. Furthermore, its daily sales since last month fell 2.4%, after growing by 4.2% in March and 1.4% in February.
One of the more alarming metrics is that FAST experienced a sharp dip in the number of top customers that are growing. For April, the percentage of top 100 national accounts exhibiting growth slid to 70% from 82% in the year ago period.
The bigger concern is that there appears to be a negative trend forming, as this metric has slipped from 88% in January, to 78% in February, 77%, in March, and now 70% in April.
This slowdown in growth may also put the company at risk of falling short of its Q2 revenue expectations, which currently stands at $1.397 bln. In order to reach that mark, it will need to generate $936 mln more in revenue over the next two months. On a yr/yr basis, that would equate to +9% growth.
Taking a look at the calendar, FAST has one less selling day in May and June this year (42) compared to last year (43). Therefore, if this deceleration in daily sales growth continues, it may indeed have a difficult time matching the consensus.
Lastly, another key factor to consider is that shares climbed by about 35% on the year, prior to this morning's news. Given the magnitude of the move, any concerning news is likely to be amplified in terms of the stock reaction as traders lock in profits.
Key Takeaways: On the surface, FAST's 12.5% revenue growth looks strong. Its coming off a solid, upside Q1 report including 10% revenue growth.
However, its growth rate last quarter did slip from the mid-teen levels it had been achieving. At the time, the modest dip didn't seem like a concern. But, looking back, it seems that was the first evidence indicating a slowdown.
Today's report confirms the deceleration and what's most concerning is that fewer of its largest customers are growing their businesses with FAST.
Since FAST is heavily exposed to the U.S. construction, oil and gas, and transportation industries, its report can be considered a data point regarding the health of the economy. But, it's also important to keep in mind that FAST is lapping some more challenging numbers on a yr/yr basis.
Therefore, its April report doesn't point to conditions falling off a cliff, but the downtrend is something to keep an eye on going forward.