It has been about a month since the last earnings report for Nordson (NDSN Quick QuoteNDSN - Free Report) . Shares have lost about 6.1% 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 catalysts.

Nordson Q2 Earnings Surpass Estimates, Revenues Miss

Nordson Corporation reported mixed second-quarter fiscal 2022 (ended Apr 30, 2022) results, wherein its earnings beat the Zacks Consensus Estimate by 7.1%, while sales missed estimates by 0.7%.

The company’s adjusted earnings were $2.43 per share in the reported quarter, beating the Zacks Consensus Estimate of $2.27. On a year-over-year basis, the bottom line increased 14.6% from $2.12.

Revenue Details

In the reported quarter, Nordson’s revenues were $635.4 million, reflecting an increase of 7.8% from the year-ago number. Organic sales expanded 7%, driven by healthy end-market businesses, including industrial and electronics. Acquisitions/divestitures had a positive impact of 3.6%. Foreign currency translation had a negative impact of 2.8%.

The company’s revenues lagged the Zacks Consensus Estimate of $644 million.

On a regional basis, revenues from the United States increased 7.7% year over year to $218.5 million. Revenues from operations in Japan fell 8.7% to $25.4 million, while that from the Asia Pacific region increased 4.2% to $164 million. Revenues generated from Europe rose 10.1% to $172.3 million, and that in the Americas increased 23% to $55.2 million.

Nordson reports revenues under two segments — Industrial Precision Solutions and Advanced Technology Solutions. A brief snapshot of the segmental sales is provided below:

Revenues generated from Industrial Precision Solutions amounted to $316.4 million, increasing 5.9% year over year. It represented 49.8% of the company’s revenues in the quarter.

Organic sales expanded 2.8% year over year. Acquisitions/divestitures had a positive impact of 7.1%, while foreign currency translation had a negative impact of 4%.

Advanced Technology Solutions’ sales were $319 million, up 9.7% from the year-ago reported quarter. It represented 50.2% of the company’s revenues in the quarter.

Organic sales increased 11.3% from the year-ago quarter, while foreign currency translation had a negative impact of 1.6%.

Margin Profile

In the reported quarter, Nordson’s cost of sales increased 10.3% year over year to $277.8 million. Notably, the cost of sales represented 43.7% of net sales. Gross profit was $357.6 million, up 5.9% year over year. The gross margin decreased 100 basis points (bps) to 56.3%. The company suffered from the adverse impacts of supply-chain woes and labor shortages.

Selling and administrative expenses increased 1.4% year over year to $173.7 million and represented 27.3% of net sales. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $208.9 million, the margin being 33%. Adjusted operating income in the reported quarter increased 10.6% year over year to $184 million, with the adjusted operating margin growing 100 bps to 29%.

Net interest expenses totaled $4.9 million, reflecting a decrease of 26.7% from the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the quarter, Nordson’s cash and cash equivalents were $120.9 million, decreasing 29.1% from $170.5 million recorded in the last reported quarter. Long-term debt was $479.7 million, reflecting a 38% decline from $773.2 million.

In the first six months of fiscal 2022, it generated net cash of $214.5 million from operating activities, down 13.4% from the comparable period of the last year. Capital invested for purchasing property, plant and equipment totaled $24.8 million, increasing 32.6%.

Dividends/Share Buyback

In the first six months of fiscal 2022, the company paid out dividends amounting to $59.3 million, up 30.9% from $45.3 million in the previous-year period.

The purchase of treasury shares by Nordson amounted to $140.5 million in the first six months of fiscal 2022, increasing from $30.3 million in the year-ago period.

Outlook

Nordson anticipates solid orders and backlog (more than $1 billion) to be beneficial in the third quarter of fiscal 2022. Pricing actions will also help mitigate the impacts of supply-chain and cost woes.

For fiscal 2022 (ending October 2022), Nordson anticipates year-over-year adjusted earnings growth of 18-21%. Sales are expected to increase 8-9% from the previous fiscal year’s reported number.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. 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.