Nordson Corporation NDSN has established itself as one of the biggest players in the plastics industry. The company is believed to have entered the market back in 2012 and there was no looking back for it since then.
A sneak peek into the last five fiscal years (fiscal 2012-fiscal 2016) financial performance reveals that Nordson’s earnings have increased roughly 37% while its returns to shareholders in the form of dividend payments surged 88.6%.
Also, since the beginning of fiscal 2017, the stock has yielded 27.1%, outperforming 22.2% gain of the S&P 500.
Nordson’s Entry Into Plastics Business
Nordson, in May 2012, acquired Extrusion Dies Industries Holdings, Inc. — a company well-known for its extrusion die and fluid coating die systems. The buyout included the assets of Premier Dies Corporation — a provider of flat polymer extrusion dies and slot coating — that was acquired by Extrusion Dies in the same year. Extrusion Dies complemented Nordson’s adhesive dispensing systems business.
In addition, in August 2013, Nordson acquired 100% equity stake in Kreyenborg Group’s Kreyenborg GmbH and BKG Bruckmann & Kreyenborg Granuliertechnik GmbH. These German companies not only expanded the company’s product offerings in the adhesive dispensing systems segment but also opened new growth opportunities in places like Shanghai, China, Kuala Lumpur, Malaysia and Georgia.
From fiscal 2012 to fiscal 2016, Nordson’s Adhesive Dispensing Systems segments flourished well. Revenues sourced from this business grew 28.6%.
What the Plastics Business Holds for Nordson?
The plastics processing equipment industry have gained momentum over time. Notably, the demand in this industry is largely driven by increased consumption of packaged foods and beverages as well as greater use of plastics in the automotive, construction, consumer electronics and medical industries.
On a geographical basis, the demand for plastics processing equipment has strengthened in many regions including Canada, Mexico, South America, Asia Pacific, Europe, Japan, and the United States.
For the long run, Nordson targets organic revenue growth in the Adhesive Dispensing Systems segment to be 1.5 to 2 times the global GDP. We believe that the company is well poised to gain traction from the surging demand for plastics processing equipment.
Its product offerings in the industry include precision melt stream products (especially screws, barrels, filtration systems, pumps, and valves), the extrusion and fluid coating dies, pelletizing systems and many more. In all, its plastic processing equipment address the needs for melting, conditioning, dispensing and giving shape.
Moreover, its research and development initiatives help in satisfying the specific requirements of its customers. Worth mentioning here is the company’s Xaloy System and BKG Hilton R-Type recycling filter. The Xaloy System, including wear-resistant screw, barrel and valve, enhances productivity and quality in injection molding of compounds with high glass fiber contents. Additionally, the company’s huge contracts help in augmenting its business within the industry. In January 2016, the company decided to install 16 of its BKG brand CrystallCut pelletizing systems at a Chinese PET resin plant. Now, it is in the final phase of completing the contract.
With a market capitalization of $7.2 billion, Nordson currently carries a Zacks Rank #2 (Buy). Its earnings in the next three to five years are predicted to grow 15% versus 12.1% expected for the industry it belongs to. Notably, the stock’s Zacks Consensus Estimate for fiscal 2018 now stands at $5.82, representing year-over-year growth of 9.4%.
Nordson Corporation Price and Consensus
Nordson Corporation Price and Consensus | Nordson Corporation Quote
We believe that Nordson’s diversified product portfolio, its innovative efforts and a large customer base give it an edge over the other players in the industry. Some other stocks worth considering in the industry are Altra Industrial Motion Corporation AIMC, Chart Industries, Inc. GTLS and IDEX Corporation IEX. All these stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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