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Why Is Nordson (NDSN) Up 1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Nordson (NDSN - Free Report) . Shares have added about 1% in that time frame, underperforming 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 Surpass Estimates

Nordson reported better-than-expected second-quarter fiscal 2021 (ended Apr 30, 2021) results. Quarterly earnings and sales surpassed the Zacks Consensus Estimate by 28.5% and 7.5%, respectively.

Adjusted earnings, excluding one-time charges and gains, in the reported quarter were $2.12 per share, surpassing the consensus estimate of $1.65. Also, the bottom line increased 34% from the year-ago figure of $1.58 owing to growth in sales.

Revenue Details

In the reported quarter, Nordson’s net sales were $589.5 million, up 11.3% year over year. The top line benefited from 10.4% improvement in organic volumes, and a positive impact of 3.7% from foreign currency translation, partially offset by 2.8% net unfavorable impact of acquisitions and divestitures. Also, the top line surpassed the Zacks Consensus Estimate of $548.6 million.

On a regional basis, revenues from the United States increased 7.4% year over year to $202.9 million. Revenues generated from operations in Japan fell 11.8% to $27.8 million, while that from the Asia Pacific region increased 15.5% to $157.4 million. Revenues generated from Europe rose 15% to $156.5 million and that in the Americas increased 22.5% to $44.9 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:

Industrial Precision Solutions’ revenues totaled $298.8 million, up 5.8% year over year. The segment gained from an 8.3% rise in volumes and 4.8% positive impact of foreign currency translation, partially offset by 7.3% net unfavorable impact of acquisitions and divestitures.

Advanced Technology Solutions’ revenues were $290.8 million, up 17.6% year over year. The increase was backed by 12.7% rise in volumes, and positive impacts of 2.4% and 2.5% from acquisitions and foreign currency translation, respectively.

Margin Profile

In the fiscal second quarter, Nordson’s cost of sales increased 5% to $251.8 million on a year-over-year basis. It represented 42.7% of net sales in the quarter compared with 45.3% in the year-ago quarter. Selling and administrative expenses increased 4.1% to $171.3 million. It represented 29.1% of net sales in the reported quarter compared with 31.1% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $191.7 million, up 25.8%.

Adjusted operating profits increased 32.7% to $166.4 million, while margin came in at 28% compared with 24% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal second quarter, Nordson’s cash and cash equivalents were $133.3 million, down from $225.7 million at the end of the previous quarter. The company’s long-term debt declined 15.5% sequentially to $829 million.

In the first six months of fiscal 2021, the company generated net cash of $247.7 million from operating activities, reflecting a year-over-year increase of 13.5%. Capital spent on the addition of property, plant and equipment fell 27.5% to $18.7 million.

During the first six months of fiscal 2021, the company used $30.3 million to buy back shares and pay out dividends amounting to $45.3 million.

Outlook

For fiscal 2021 (ending October 2021), Nordson anticipates adjusted earnings of $7.20-$7.50, indicating growth of 31-37% on a year-over-year basis. For the fiscal year, the company expects year-over-year sales growth of 8-10%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 17.91% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise 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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