Nordson Q3 Earnings Miss Estimates

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Nordson Corporation (NDSN) reported its financial result for the fiscal third quarter of 2013 (ended Jul 31) on Aug 22, 2013. Non-GAAP earnings per share in the quarter fell 6.6% year over year to 99 cents, compared with $1.06 earned in the year-ago quarter. The result was also below the Zacks Consensus Estimate of $1.04 and below the company’s guidance range of $1.00-$1.09 per share range.

GAAP earnings per share, including one-time items, came in at $1.01.     

Revenues

Nordson Corporation’s revenues in the quarter increased 6.1% year over year to $403.0 million driven primarily by 7% contribution from acquisitions, and offset by 1% negative foreign currency translation impact. Organic growth was flat in the quarter. Result fell below the company’s guidance range of $404-$419 million range.

Backlog exiting the quarter stood at $197 million, down 21% compared with the year-ago period while orders for the 12-week ended Aug 18, 2013 were flat compared with the same period a year-ago.

A brief discussion of revenue segments of Nordson Corporation has been provided below:

Revenues from Adhesive dispensing systems business increased 11.9% year over year and represented 48.6% of total revenue in the quarter. Advanced technology systems recorded 1.8% fall in revenues and represented 37.3% of total revenue while revenues generated from Industrial coating systems business expanded by 9.8% and stood at 14.1% of total revenue.

On a regional basis, revenues generated in the United States grew 14.7% year over year; Europe by 9.0% and Asia Pacific by 2.9%. These increases were offset by revenue decline of 0.1% and 12.8% recorded in the Americas and Japan, respectively.   

Margins

Cost of sales in the fiscal third quarter went up 13.5% year over year and represented 44.1% of total revenue; up from 41.2% in the year-ago quarter. Selling and administrative expenses, as a percentage of total revenue, stood at 32.7%. Operating margin in the quarter was 23.1%, down from 25.9% in the year-ago quarter.

Balance Sheet

Exiting the fiscal third quarter 2013, Nordson Corporation had cash and marketable securities balance of $75.4 million, up from $62.8 million in the previous quarter. Long-term debt stood at $548.2 million, up from $551.6 million in the sequential quarter.
 
Cash Flow

In the fiscal third quarter 2013, Nordson Corporation generated roughly $92.0 million cash from operating activities, an increase of 17% over the year-ago quarter. Capital spending increased 51.2% and came in at $92.0 million. Free cash flow was $84.8 million, up 17.5% year over year.

On Aug 16, 2013, Nordson Corporation announced an increase of 20.0% or 3 cents in its quarterly dividend rate from 15 cents to 18 cents. This increase is the company’s 50th annual increase in a row. The new dividend will be paid on Sep 10, 2013 to shareholders of record as on Aug 27, 2013.

Also, Nordson received approval for a $200 million share buyback program that replaces its existing $100 million authorization. Of the old program, roughly $41 million shares have already been repurchased by the company.

Outlook

For the fiscal fourth quarter of 2013, management of Nordson Corporation anticipates sales to range within $391-$408 million, down 7%-11% year over year. Organic growth is predicted to decline in 6%-10% range while currency translation is likely to impact results negatively by 1%. Earnings per share are expected to be within the 87-98 cents range.

Nordson Corporation is a $4.6 billion company, operating in the diversified machinery industry. The stock currently has a Zacks Rank #2 (Buy). Other stocks to watch out for in the industry are Gorman-Rupp Co. (GRC) and Graham Corp. (GHM), each with a Zacks Rank #1 (Strong Buy), while The Middleby Corp. (MIDD) carries a Zacks Rank #2 (Buy).
 

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