Nordson Corporation NDSN is benefiting from strength across its diverse end markets and growth across all major product lines. The company’s measures to expand its market presence through acquisitions are noteworthy. NDSN’s consistent measures to reward its shareholders through dividends and share buybacks are an added positive.
While lockdowns in China are weighing on the Industrial Precision Solution segment’s performance, robust demand for packaging and assembly product lines in the food and beverage industry and industrial end markets in most geographies bode well for the unit.
Growth across all major product lines, especially in the electronics dispense and biopharma fluid component product lines are driving revenues at the Advanced Technology Solutions segment. Strength across international regions should continue to aid the segment’s performance.
Pricing actions to counter raw material cost inflation are supporting its top line. The company anticipates its fourth-quarter fiscal 2022 performance to benefit from solid orders and backlogs (more than $1 billion). It expects adjusted earnings per share to increase 18-21% year over year in fiscal 2022. Revenues are expected to increase 8-9% in the same period.
Nordson’s measures to penetrate unexplored markets and expand its product lines through acquisitions are contributing to top-line growth. In August, the company entered into a deal to acquire CyberOptics Corporation. The buyout will expand Nordson’s semiconductor test and inspection capabilities with the help of CyberOptics’ 3D optical sensing technology and wireless measurement sensors.
Subject to regulatory approvals, the transaction is expected to close in the first quarter of fiscal 2023. In November 2021, the company acquired NDC Technologies, expanding its test and inspection platform. The buyout has enabled Nordson to strengthen its position in the electronics end market and expand into the new end markets, including film extrusion & converting, consumer non-durable, cable & tubing and energy storage.
The NDC acquisition boosted Industrial precision solution sales by 7% in the fiscal third quarter. Nordson has also been disposing certain assets/businesses to focus on its core areas of growth and enhance shareholder returns. In February 2021, NDSN divested its screws and barrels product line. This move is in sync with the company’s portfolio-realignment strategy.
Nordson has a sound track record with respect to dividend payment history. In August, the company hiked its quarterly dividend by 27% to 65 cents. This marked the company’s 59th consecutive year of dividend increase. In the first nine months of fiscal 2022, NDSN paid out dividends amounting to $88.7 million, up 30.4% year over year.
The company is also active on the buyback front. It bought back shares worth more than $230 million in the first nine months of fiscal 2022 compared with $46.8 million in the same period of the last fiscal year.
Benefiting from the abovementioned tailwinds, shares of Nordson have outperformed its industry in the past six months.
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In light of these positives, we believe investors should hold on to the Nordson stock for now, as is suggested by its Zacks Rank #3 (Hold).
Continued expansion in manufacturing activities and gradual easing of supply-chain constraints should drive the company’s performance. The Zacks Consensus Estimate for the company’s 2022 earnings has been revised upward by nearly 1% in the past 90 days.
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Lindsay Corporation LNN sports a Zacks Rank #1 (Strong Buy). LNN pulled a trailing four-quarter earnings surprise of 25.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Lindsay Corporation has an estimated earnings growth rate of 44.1% for the current year. Shares of the company have rallied more than 25% in the past six months.
Greif, Inc. GEF presently carries a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have gained 26% in the past six months.
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