The Open Question Under Fastenal Stock’s Price

Fastenal (FAST) stock trades at 43.3 times earnings. The S&P 500 trades at 22.9. Shareholders are clearly paying a premium for a company that keeps growing. Management says its key account strategy mainly drove the latest quarter. These large customers generally carry lower gross margins. Fastenal has not yet shown that it can keep winning those accounts without wearing down the profit it makes on each sale.

How Far Has Fastenal's Gross Margin Slipped?

The decline is less than one percentage point over two years, but the figure has dropped annually. Fastenal retained 45.5% of its sales as gross profit in the twelve months to June 2024. That metric slipped to 45.1% a year later. In the twelve months to June 2026, the figure fell again to 44.7%. This still sits well above the 39.4% W.W. Grainger kept over its own latest twelve months. The recent slide also arrived during the year revenue grew fastest of the three, rising 12.5%.

Management quantified one cause of that pressure in its latest quarter. Executives estimated the drag from expanding with large customers cost about 50 basis points of margin in the third quarter of 2026. Fastenal held its third-quarter 2026 call on October 14, 2026. Analysts used the opportunity to ask how much of that quarter's gross margin was temporary and what to assume for the fourth quarter.

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Fastenal Says Big Customers Support Operating Margin

Executives responded that large customers carry lower gross margins, but their higher volumes and more efficient service support attractive operating margins. Fastenal reported an operating margin of 21.5% in the third quarter. By management's count, that metric was up 90 basis points.

On gross margin itself, management has said that favorable items added 40 basis points in the third quarter. About 20 of those basis points came from timing and should not be expected to continue. Fastenal's third-quarter gross margin was about 45%, 40 basis points lower than a year earlier. Without the timing help, it would be about 60 lower. The chief financial officer called a fall of around 60 basis points from a year earlier a good underlying point to consider. Management also stated it is comfortable that the gap between its prices and its costs will not widen in the fourth quarter. That gap worked against the company by about 30 basis points in the third quarter. Fastenal does not give quarterly or annual guidance. The underlying figure from the chief financial officer serves as a pointer rather than a forecast.

Fastenal's Fourth-Quarter Gross Margin Arrives In January

Fastenal is expected to report its fourth quarter on or around January 19, 2027. The upcoming results will be measured against a soft comparable period. Management has said that about 50 basis points of negative timing was in gross margin for the fourth quarter of 2025. When the report arrives, the key figure to watch will be gross margin for the fourth quarter of 2026, measured against 44.3% a year earlier.

Is Too Much Of Your Wealth Riding On One Stock?

Fastenal holders are waiting on an answer management has not yet given. When one position grows into a large part of your wealth, a sharp fall can hurt your whole plan, and selling to spread the money out can bring a large tax bill. Glenn Caldicott, CIO of our Boston-based partner firm Empirical Asset Management, an SEC-registered investment adviser, offers a free 15-minute strategy review of ways to protect a concentrated position and unwind it with less tax.

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