Here's a fun thing about earnings season: you can do everything analysts asked of you and still get punished. Fastenal Company (FAST), the global supply chain services provider, learned that lesson Wednesday.

The company reported better-than-expected third-quarter 2026 results, with both earnings and sales topping analyst estimates. Diluted EPS of 35 cents beat the 34-cent estimate, while sales of $2.463 billion topped the $2.440 billion estimate. Net sales rose 15.5% year over year, and net income increased 19.7% to $401.6 million.

And yet, Fastenal shares declined. The beats were real, but so was the fine print: continued gross-margin pressure, a lower device-signing target and plans for higher capital spending.

Contract Wins, Manufacturing Drive Growth

Sales growth reflected stronger customer contract signings, product pricing and modest improvement in industrial production. Pricing contributed about 240 basis points to growth, while foreign exchange reduced growth by roughly 10 basis points.

The end-market breakdown was pretty healthy across the board. Heavy manufacturing daily sales rose 20.2%, other manufacturing increased 13.2%, non-residential construction grew 12.0%, and other end markets gained 12.4%.

Contract customer sales increased 18.8%, compared with 7.8% growth for non-contract customers. Larger customer relationships also remained a key growth driver. Sales from sites generating at least $50,000 per month increased to $1.457 billion from $1.142 billion, while the number of those sites rose to 3,288 from 2,771.

Digital Sales Expand, Device Target Comes Down

Digital Footprint sales rose 16.1% to $1.537 billion and represented 61.4% of total sales. FMI sales increased 14.6% to $1.121 billion, while FASTBin and FASTVend sales climbed 17.6% to $827.2 million. Installed weighted FASTBin and FASTVend devices reached 143,878.

But here's where things get a little less rosy. Fastenal lowered its 2026 weighted FASTBin and FASTVend device-signing target to 27,000-29,000 from 28,000-30,000. Those vending machines are a big part of the company's on-site strategy, so trimming the target is the kind of detail investors notice even when the headline numbers look fine.

Gross Margin Declines

Gross margin declined about 40 basis points to 44.8%, pressured by customer mix and price-cost effects. Direct sourcing savings, supplier rebates, and tariff refunds provided offsets.

The good news: operating margin expanded 90 basis points to 21.5% as SG&A leverage more than offset gross-margin pressure. Operating cash flow rose 9% to $421.6 million. Fastenal ended the quarter with $211.9 million in cash and $100 million in total debt, down from $195 million a year earlier.

The company returned $328.4 million to shareholders through $298.2 million in dividends and $30.2 million in share repurchases.

Maintains Capital Spending Outlook

For 2026, Fastenal continues to expect net property and equipment investment of $310 million to $330 million. The company also expects an ongoing tax rate of about 24.6%, absent discrete items or broader tax-law changes.

FAST Price Action: Fastenal shares were down 4.18% at $49.28 at the time of publication on Wednesday, according to market data.