Nordson (NDSN) Up 7.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Nordson (NDSN). Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nordson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Nordson Q2 Earnings & Revenues Beat Estimates
Nordson’s second-quarter fiscal 2023 (ended Apr 30, 2023) adjusted earnings of $2.26 per share beat the Zacks Consensus Estimate of $2.10. The bottom line decreased 7% from $2.43 per share in the year-ago fiscal quarter.
Revenue Details
In the reported quarter, Nordson’s revenues were $650.2 million, reflecting an increase of 2.3% from the year-ago fiscal quarter’s number. Revenues beat the Zacks Consensus Estimate of $638 million.
Organic sales expanded 1.3%, driven by combined growth in Asia Pacific. Acquisitions/divestitures had a positive impact of 2.8% while foreign currency translation had a negative impact of 1.8%.
On a regional basis, revenues from the Asia Pacific region increased 7.5% to $203.5 million. Revenues generated from Europe decreased 2.5% to $167.9 million, while the metric in the Americas increased 1.8% to $278.7 million.
Nordson started reporting revenues under three segments effective Aug 1, 2022. The segments are Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions. A brief snapshot of the segmental sales is provided below:
Revenues from Industrial Precision Solutions amounted to $335.8 million in the quarter under review, up 6.1% from the year-ago fiscal quarter’s level. The segment contributed 51.6% to NDSN’s top line in the quarter.
Organic sales increased 8.5% from the year-ago fiscal quarter’s level. Foreign currency translation had a negative impact of 2.4%.
Revenues from Medical and Fluid Solutions amounted to $166.5 million in the quarter under review, down 3.3% from the year-ago fiscal quarter’s level. The segment contributed 25.6% to NDSN’s top line in the reported quarter.
Organic sales decreased 2.3% from the year-ago fiscal quarter’s level, while foreign currency translation had a negative impact of 1%.
Advanced Technology Solutions’ sales were $147.8 million, up 0.7% from the year-ago fiscal quarter’s figure. The metric represented 22.8% of Nordson’s revenues in the period.
Organic sales decreased 9.9% from the year-ago fiscal quarter’s level. Acquisitions/divestitures had a positive impact of 12.3%, while foreign currency translation had a negative impact of 1.7%.
Margin Profile
In the reported quarter, Nordson’s cost of sales increased 7.3% from the year-ago fiscal quarter’s level to $298 million. The cost of sales represented 45.8% of net sales. Gross profit was $352.1 million, down 1.5% from the year-ago fiscal quarter’s level. The gross margin contracted 210 basis points (bps) to 54.2%. NDSN suffered the impacts of supply-chain woes and labor shortages.
Selling and administrative expenses increased 3.4% year over year to $179.6 million and represented 27.6% of net sales. EBITDA was $203 million, the margin being 31%. The adjusted operating income in the reported quarter was $175.9 million, decreasing 4.4% year on year. The adjusted operating margin decreased 200 bps to 27%.
Net interest expenses totaled $9.5 million, reflecting a 91.7% increase from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
At the time of exiting the fiscal second quarter, Nordson’s cash and cash equivalents reached $129.1 million, decreasing 21% from the $163.5 million recorded at the end of the fourth quarter of fiscal 2022. Long-term debt was $345.9 million, reflecting a 0.2% increase from $345.3 million.
In the first six months of fiscal 2023, NDSN generated net cash of $287.9 million from operating activities, up 34.2% from the last fiscal year’s tally. Capital invested in purchasing property, plant and equipment totaled $15.3 million, decreasing 38.1% from the year-ago fiscal period’s figure.
Dividends/Share Buyback
In the first six months of fiscal 2023, Nordson paid out dividends amounting to $74.5 million, up 25.6% from $59.3 million in the same period of the previous fiscal year.
Nordson’s treasury purchase shares amounted to $54.4 million in the first six months of fiscal 2023, decreasing from $140.5 million in the last fiscal year.
Outlook
For fiscal 2023 (ending October 2023), Nordson anticipates adjusted earnings to be $8.90-$9.30 per share compared with $8.75-$9.50 per share anticipated earlier. Sales are expected to increase 0-3% from the previous fiscal year’s reported number.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -6.56% due to these changes.
VGM Scores
At this time, Nordson has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nordson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Nordson is part of the Zacks Manufacturing - General Industrial industry. Over the past month, Crane (CR), a stock from the same industry, has gained 10.1%. The company reported its results for the quarter ended March 2023 more than a month ago.
Crane reported revenues of $513.8 million in the last reported quarter, representing a year-over-year change of
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