Nordson (NDSN) Down 2.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Nordson (NDSN). Shares have lost about 2.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nordson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Nordson Beats on Q3 Earnings, Narrows 2023 Guidance
Nordson’s third-quarter fiscal 2023 (ended Jul 31, 2023) adjusted earnings (excluding 13 cents from non-recurring items) of $2.35 per share surpassed the Zacks Consensus Estimate of adjusted earnings of $2.31 per share. The bottom line decreased 5.6% year over year.
Revenue Details
In the reported quarter, Nordson’s revenues were $648.7 million, decreasing 2% from the year-ago fiscal quarter’s number. Revenues missed the Zacks Consensus Estimate of $665 million.
Organic sales declined 5%, due to ongoing pressure in electronics, primarily semiconductor dispense applications, and biopharma end markets. Acquisitions/divestitures had a positive impact of 2.4% while foreign currency translation had a positive impact of 0.1%.
On a regional basis, revenues from the Asia Pacific region decreased 17.6% to $190.6 million. Revenues generated from Europe increased 10.5% to $167.5 million while the metric in the Americas increased 4.1% to $290.5 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 $338.3 million in the quarter under review, down 0.9% from the year-ago fiscal quarter’s level. The segment contributed 52.2% to NDSN’s top line in the quarter.
Organic sales decreased 1.5% from the year-ago fiscal quarter’s level. Foreign currency translation had a positive impact of 0.6%.
Revenues from Medical and Fluid Solutions amounted to $170.9 million in the quarter under review, down 3.9% from the year-ago fiscal quarter’s level. The segment contributed 26.3% to NDSN’s top line in the reported quarter.
Organic sales decreased 3.9% from the year-ago fiscal quarter’s level.
Advanced Technology Solutions’ sales were $139.5 million, down 12.8% from the year-ago fiscal quarter’s figure. The metric represented 21.5% of Nordson’s revenues in the period.
Organic sales decreased 12.8% from the year-ago fiscal quarter’s level. Acquisitions/divestitures had a positive impact of 10.7% while foreign currency translation had a negative impact of 0.4%.
Margin Profile
In the reported quarter, Nordson’s cost of sales decreased 2.8% from the year-ago fiscal quarter’s level to $288.4 million. Gross profit was $360.3 million, down 1.4% from the year-ago fiscal quarter’s level. The gross margin increased 30 basis points to 55.5%.
Selling and administrative expenses increased 4.8% year over year to $189.3 million. Adjusted EBITDA was $207.9 million, the margin being 32%. The adjusted operating income in the reported quarter was $180.8 million, decreasing 4% year on year. The adjusted operating margin of 28% was in-line with the year-ago period’s figure.
Net interest expenses totaled $11.5 million, reflecting a 122.4% increase from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
At the time of exiting the fiscal third quarter, Nordson’s cash and cash equivalents were $143.1 million compared with $163.5 million recorded at the end of the fourth quarter of fiscal 2022. Long-term debt was $727.5 million compared with $345.3 million recorded at the end of the fourth quarter of fiscal 2022.
In the first nine months of fiscal 2023, NDSN generated net cash of $478.1 million from operating activities, up 40.7% from the last fiscal year’s tally. Capital invested in purchasing property, plant and equipment totaled $24.2 million, decreasing 38.4% from the year-ago fiscal period’s figure.
Dividends/Share Buyback
In the first nine months of fiscal 2023, Nordson paid out dividends amounting to $111.5 million, up 25.8% from $88.7 million in the same period of the previous fiscal year.
Nordson’s treasury purchase shares amounted to $78.2 million in the first nine months of fiscal 2023, decreasing from $233.8 million in the last fiscal year.
Fiscal 2023 Outlook Narrowed
For fiscal 2023 (ending October 2023), Nordson anticipates adjusted earnings to be $8.90-$9.05 per share compared with $8.90-$9.30 per share anticipated earlier. The Zacks Consensus Estimate for the same stands at $9.06 per share. Sales are expected to increase 0-2% from the previous fiscal year’s reported number compared with 0-3% stated earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Nordson has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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, Applied Industrial Technologies (AIT), a stock from the same industry, has gained 3.8%. The company reported its results for the quarter ended June 2023 more than a month ago.
Applied Industrial Technologies reported revenues of $1.16 billion in the last reported quarter, representing a year-over-year change of +9.1%. EPS of $2.35 for the same period compares with $2.02 a year ago.
Applied Industrial Technologies is expected to post earnings of $2.06 per share for the current quarter, representing a year-over-year change of +4.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.7%.
Applied Industrial Technologies has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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