A month has gone by since the last earnings report for Nordson (NDSN Quick QuoteNDSN - Free Report) . Shares have lost about 7.3% 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 its most recent earnings report in order to get a better handle on the important drivers.

Nordson Q3 Earnings & Revenues Surpass Estimates

Nordson reported better-than-expected third-quarter fiscal 2022 (ended Jul 31, 2022) results, wherein earnings beat the Zacks Consensus Estimate by 1.6% and sales beat the same by 1.5%.

NDSN’s adjusted earnings were $2.49 per share in the reported quarter, beating the Zacks Consensus Estimate of $2.45. The bottom line increased 2.9% from $2.42 in the year-ago fiscal quarter.

Revenue Details

In the reported quarter, Nordson’s revenues were $662.1 million, reflecting an increase of 2.4% from the year-ago fiscal quarter’s number. Revenues beat the Zacks Consensus Estimate of $652 million.

Organic sales expanded 3.9%, driven by healthy end-market businesses, mostly in medical and electronics. Acquisitions/divestitures had a positive impact of 3.5% while foreign currency translation had a negative impact of 5%.

On a regional basis, revenues from the United States increased 8.7% from the year-ago fiscal quarter’s level to $219.1 million. Revenues from operations in Japan fell 7.5% to $23.1 million, while the same from the Asia Pacific region decreased 1% to $208.2 million. Revenues generated from Europe decreased 6.6% to $151.7 million, while the metric in the Americas increased 26% to $60.1 million.

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

Revenues from Industrial Precision Solutions amounted to $341.2 million in the quarter under review, down 1.2% from the year-ago fiscal quarter’s level. The segment contributed 51.5% to NDSN’s top line in the quarter.

Organic sales dipped 1.1% from the year-ago fiscal quarter’s level. Acquisitions/divestitures had a positive impact of 6.5%, while foreign currency translation had a negative impact of 6.6%.

Advanced Technology Solutions’ sales were $320.9 million, up 6.5% from the year-ago fiscal quarter’s figure. The metric represented 48.5% of Nordson’s revenues in the period.

Organic sales increased 9.6% from the year-ago fiscal quarter’s level, while foreign currency translation had a negative impact of 3.1%.

Margin Profile

In the reported quarter, Nordson’s cost of sales increased 5.3% from the year-ago fiscal quarter’s level to $296.5 million. The cost of sales represented 44.8% of net sales. Gross profit was $365.6 million, up 0.1% from the year-ago fiscal quarter’s level.

The gross margin contracted 130 basis points (bps) to 55.2%. NDSN suffered the adverse impacts of supply-chain woes and labor shortages.

Selling and administrative expenses increased 2.1% year over year to $180.7 million and represented 27.3% of net sales. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $213.2 million, the margin being 32%.

Adjusted operating income in the reported quarter was $188.3 million, flat year on year. Adjusted operating margin decreased 70 bps to 28.4%.

Net interest expenses totaled $5.2 million, reflecting a decrease of 7.1% 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 $128.7 million, decreasing 57.1% from $300 million recorded at the end of the fourth quarter of fiscal 2021. Long-term debt was $401.7 million, reflecting a 48.6% decline from $781.7 million.

In the first nine months of fiscal 2022, NDSN generated net cash of $339.7 million from operating activities, down 9.5% from the last fiscal year’s comparable period’s tally. Capital invested in purchasing property, plant and equipment totaled $39.4 million, increasing 40.2% from the year-ago fiscal period’s figure.

Dividends/Share Buyback

In the first nine months of fiscal 2022, Nordson paid out dividends amounting to $88.7 million, up 30.4% from $68 million in the same period of the previous fiscal year.

Nordson’s purchase of treasury shares amounted to $233.8 million in the first nine months of fiscal 2022, increasing from $46.8 million in the same period of the last fiscal year.

Outlook

Nordson anticipates solid orders and backlog (more than $1 billion) to be beneficial in the fourth 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 adjusted earnings growth of 18-21% from the earlier fiscal year’s level. Sales are expected to increase 8-9% from the previous fiscal year’s reported number.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Nordson has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 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.