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Why Is Nordson (NDSN) Up 1.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Nordson (NDSN). Shares have added about 1.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

Nordson Q3 Earnings & Revenues Top Estimates, Up Y/Y

Nordson reported better-than-expected third-quarter fiscal 2021 (ended Jul 31, 2021) results. Earnings and sales surpassed the Zacks Consensus Estimate by 14.2% and 7.3%, respectively.

Adjusted earnings, excluding one-time charges and gains, in the reported quarter were $2.42 per share, surpassing the consensus estimate of $2.12. Also, the bottom line increased 70% from the year-ago figure of $1.42 owing to sales growth.

Revenue Details

In the reported quarter, Nordson’s net sales were $646.9 million, up 20.2% year over year. The top line benefited from a 20.2% improvement in organic volumes, and a positive impact of 3.8% from foreign currency translation, partially offset by 3.8% net unfavorable impact of acquisitions and divestitures. The top line surpassed the Zacks Consensus Estimate of $603 million.

On a regional basis, revenues from the United States increased 9.8% year over year to $201.5 million. Revenues from operations in Japan fell 20.1% to $24.9 million, while that from the Asia Pacific region increased 37.4% to $210.4 million. Revenues generated from Europe rose 22.9% to $162.3 million and that in the Americas increased 24.7% to $47.7 million.

The company reports under Industrial Precision Solutions and Advanced Technology Solutions segments. A brief discussion on the segmental performance in the quarter is provided below:

Industrial Precision Solutions’ revenues totaled $345.5 million, up 19.5% year over year. The segment gained from a 22.4% rise in volumes and a 5.1% positive impact of foreign currency translation, partially offset by an 8% net unfavorable impact of acquisitions and divestitures.

Advanced Technology Solutions’ revenues were $301.4 million, up 20.9% year over year. The increase was backed by a 17.8% rise in volumes, and positive impacts of 0.8% and 2.3% from acquisitions and foreign currency translation, respectively.

Margin Profile

In the fiscal third quarter, Nordson’s cost of sales increased 9.4% to $281.6 million on a year-over-year basis. It represented 43.5% of net sales in the quarter compared with 47.8% in the year-ago quarter. Selling and administrative expenses increased 4.9% to $177 million. It represented 27.4% of net sales in the reported quarter compared with 31.4% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization in the quarter were $215.2 million, up 45.2%.

Adjusted operating profits increased 57.3% to $188.3 million, while margin came in at 29.1% compared with 22.2% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal third quarter, Nordson’s cash and cash equivalents were $174.2 million, up from $133.3 million at the end of the previous quarter. The company’s long-term debt declined 4.7% sequentially to $789.7 million.

In the first nine months of fiscal 2021, the company generated net cash of $375.5 million from operating activities, reflecting a year-over-year increase of 21.1%. Capital spent on the addition of property, plant and equipment fell 22.2% to $28.1 million.

During the first nine months of fiscal 2021, the company used $46.8 million to buy back shares and pay out dividends amounting to $68 million.

Outlook

For fiscal 2021 (ending January 2022), Nordson anticipates adjusted earnings of $7.75-$7.95, higher than $7.20-$7.50 predicted earlier. The figure indicates growth of 41-45% on a year-over-year basis.

For the fiscal year, the company expects year-over-year sales growth of 11-12% compared with rise of 8-10% guided earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

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 #2 (Buy). We expect an above average return from the stock in the next few months.


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