Fastenal Company (NASDAQ:FAST) reported 2nd Quarter results this morning. The company was expected to earn 37 cents per share and actually earned 38 cents, beating analyst expectations by a penny. Revenue was expected to be $808 million and was actually $805 million, slightly lower than expected.
Shares traded higher and broke through the 50-day simple moving average.
Fastenal operates as a wholesaler and retailer of industrial and construction supplies for the United States.
The company points to the Purchasing Manufacturers Index ('PMI') for a forecast of total economic growth and sales in the business. The PMI dropped to 49.7 in June from 53.5 in May.
However, recent reports from the housing market are showing positive signs of life. Residential construction activity rose 3% in May 2012, as reported by the Department of Commerce. This boosted total construction activity to a 0.9% gain for the period versus expectations of 0.2%.
Other reports on home prices show that the housing market is improving steadily. The Case-Shiller 20-city Index rose 1.3% from March to April.
Additionally, reductions in home inventories, are likely driving increases in housing prices. Even at reduced sales volume, inventory levels are at 6.6 months supply. Continued tightness in inventory will drive further price increases.
The mean price target on the stock is $45.20, but that should increase with stronger economic and operating results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.