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Why Is Nordson (NDSN) Up 5.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Nordson (NDSN - Free Report) . Shares have added about 5.5% 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 Q1 Earnings & Revenues Surpass Estimates

Nordson reported better-than-expected first quarter of fiscal 2021 (ended Jan 31, 2021) results. Quarterly earnings and sales surpassed the Zacks Consensus Estimate by 24.5% and 3.5%, respectively.

Adjusted earnings, excluding one-time charges and gains, in the reported quarter were $1.32 per share, surpassing the consensus estimate of $1.06. The bottom line increased 48% from the year-ago figure of 89 cents owing to growth in sales.

Revenue Details

In the reported quarter, Nordson’s net sales were $527 million, up 6% year over year. The top line benefited from a 3% improvement in organic volumes, and a positive impact of 3% positive impact of foreign currency translation and acquisitions. Notably, the top line surpassed the Zacks Consensus Estimate of $509 million.

At the end of the reported quarter, backlog was $495 million.

On a regional basis, revenues from the United States fell 1.7% year over year to $185.3 million. Revenues generated from operations in Japan dropped 1.6% to $27.1 million, while that from the Asia Pacific region increased 17.7% to $142.8 million. Revenues generated from Europe rose 6.9% to $135.2 million and that in the Americas increased 16.3% to $36.1 million.

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

The Industrial Precision Solutions segment’s revenues totaled $288.4 million, up 9.3% year over year. The segment gained from a 6% rise in volumes and 3% positive impact of foreign currency translation.

Advanced Technology Solutions’ revenues were $238.2 million, up 3% year over year. The increase was backed by the positive impact of 2% from acquisitions and 2% positive impact of foreign currency translation, partially offset by a 1% decline in volumes.

Margin Profile

In the fiscal first quarter, Nordson’s cost of sales increased 2% to $236.6 million on a year-over-year basis. It represented 44.9% of net sales in the quarter compared with 46.8% in the year-ago quarter. Selling and administrative expenses contracted 3.8% to $180.9 million. It represented 34.4% of net sales in the reported quarter compared with 38% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $135 million, up 26.2%.

Adjusted operating profits increased 39% to $109 million, while the margin came in at 20.7% compared with 15.8% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal first quarter, Nordson’s cash and cash equivalents were $225.7 million, up from $208.3 million at the end of the previous quarter. The company’s long-term debt declined 8.1% sequentially to $981.3 million.

In first three months of fiscal 2021, the company generated net cash of $143.3 million from operating activities, reflecting a year-over-year increase of 23.2%. Capital spent on the addition of property, plant and equipment fell 43.2% to $7.9 million.

During first three months of fiscal 2021, the company used $5.3 million to buy back shares and pay out dividends amounting to $22.7 million.

Outlook

For fiscal 2021 (ending January 2022), Nordson anticipates adjusted earnings growth of 15-22% on a year-over-year basis. For the fiscal year, the company expects year-over-year sales growth of 4-6%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Nordson has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 B. 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.


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