Fastenal's (NASDAQ:FAST) Margins Improving at Smaller Stores

Margins at Fastenal's (NASDAQ:FAST) smaller stores have reached levels believed not attainable in the past, and are driving the earnings of the company going forward.

UBS says, "We are increasing our margin forecasts to reflect good operating performance, in particular at smaller stores. In recent periods stores with $60-$100K in monthly revenue have seen EBIT margins tracking near 23%, a level once considered out of reach for a store below $125K in monthly sales. We think strong cost execution and same store sales initiatives have, and will continue to drive margins up.

"Our revenue grew 18% in 2010 on what by historical standards was modest store growth (5% in 2010, 3% in 2009), evidencing robust same store sales initiatives. A concern is tougher comps, but sales investments and a better macro should help."

UBS reiterates a "Neutral" rating on Fastenal (FAST), which closed Wednesday at $59.76, losing $1.19, or 1.95 percent. UBS raised their price target on Fastenal from $60 to $63.