Fastenal Company (NASDAQ:FAST) topped revenue expectations in its first-quarter report Monday, but margin pressure and tariff headwinds pushed the stock lower in early market reaction.

Sales Rise, Margins Mixed

The industrial and construction supplies distributor posted net sales of $2.20 billion, up 12.4% year-over-year and ahead of the $2.199 billion estimate.

GAAP diluted earnings per share were 30 cents, up from 26 cents and in line with expectations, while net income rose 13.8% to $339.8 million.

Operating income increased 13.6% to $447.6 million, with operating margin expanding to 20.3% from 20.1% on operating leverage and cost discipline.

Gross margin declined to 44.6% from 45.1% due to unfavorable price and cost dynamics. Transportation costs, rebate headwinds, and a shift in customer mix also weighed on margins.

These pressures were partially offset by benefits from the company's fastener expansion project. SG&A improved to 24.3% of sales from 25.0%.

Sales Growth and Customer Mix

Sales growth was supported by contract wins and a modest improvement in industrial production. It also benefited from a 60-basis-point foreign exchange gain and approximately 350 basis points of pricing.

Contract sales rose 14.6% and accounted for 75.4% of revenue, continuing to outpace non-contract sales, which grew 6.7%.

Direct materials slightly outpaced indirect materials, driven by strength in fasteners and manufacturing demand.

End Market Trends

By end market, heavy manufacturing grew 14.1%, other manufacturing 9.9%, non-residential construction 17.2%, and other end markets 11.3%.

Manufacturing represented 76.2% of total sales.

Digital Performance and Site Expansion

Digital initiatives remained a key driver, with FASTBin and FASTVend signings rising 8.3% to 6,950 MEUs and total installations up 5.9%.

FMI sales increased 16.6% to $1.00 billion, or 44.9% of revenue, while Digital Footprint sales rose 13.6% to $1.37 billion, representing 61.5% of sales.

Customer engagement strengthened, with $50k+/month sites increasing to 2,909 from 2,502 and average monthly sales per site rising to $7,939.

Cash Strength, Tariff Pressure

Operating cash flow was $378.4 million, or 111% of net income, up from $262.2 million a year earlier. Cash totaled $308.6 million at quarter-end, and total debt declined to $125.0 million.

The company returned $295.7 million to shareholders.

Fastenal expects 2026 capital expenditures of $310 million to $330 million. Spending will be driven by facility upgrades, logistics investments, and higher IT spending.

The company maintains its target of 28,000 to 30,000 FASTBin and FASTVend device signings.

A company executive during the conference call said tariff-related costs rose faster than pricing, leaving margins about 40 basis points below internal targets.

The executive also flagged delays in cost discussions with customers and suppliers as they await clarity on potential tariff refunds.

FAST Price Action: Fastenal shares were down 7.37% at $45.54 at the time of publication on Monday, according to Benzinga Pro data.

Photo by T. Schneider via Shutterstock