A month has gone by since the last earnings report for Nordson (NDSN Quick QuoteNDSN - Free Report) . Shares have lost about 1.5% 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 drivers.

Nordson Q1 Earnings & Revenues Miss Estimates

Nordson reported first-quarter fiscal 2023 adjusted earnings of $1.95 per share, which missed the Zacks Consensus Estimate of $1.98. The bottom line decreased 5.8% from $2.07 in the year-ago quarter.

Total revenues of $610.5 million inched up 0.2% from the year-ago quarter. It missed the Zacks Consensus Estimate of $623 million.

Organic sales expanded 1%, driven by combined growth in Europe and the Americas. Acquisitions/divestitures had a positive impact of 3%, while foreign currency translation had a negative impact of 4%.

On a regional basis, revenues from the Asia Pacific region decreased 14.4% to $182.7 million. Revenues generated from Europe increased 4.5% to $162.9 million, while the metric in the Americas increased 10.4% to $264.9 million.

Nordson started reporting revenues under three segments, effective Aug 1, 2022. The segments are Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions. A brief snapshot of the segmental sales is provided below:

Revenues from Industrial Precision Solutions amounted to $311.5 million in the quarter under review, down 3.8% from the year-ago quarter. The segment contributed 51% to NDSN’s top line in the quarter.

Organic sales increased 1.2% from the year-ago quarter. Foreign currency translation had a negative impact of 5%.

Revenues from Medical and Fluid Solutions amounted to $154.3 million in the quarter under review, down 2.8% from the year-ago quarter. The segment contributed 25.3% to NDSN’s top line in the reported quarter.

Organic sales decreased 0.8% from the year-ago quarter, while foreign currency translation had a negative impact of 2%.

Advanced Technology Solutions’ sales were $144.6 million, up 14.4% from the year-ago quarter. The metric represented 23.7% of Nordson’s revenues in the period.

Organic sales increased 4.6% from the year-ago quarter. Acquisitions/divestitures had a positive impact of 13.5%, while foreign currency translation had a negative impact of 3.7%.

Margin Profile

In the reported quarter, Nordson’s cost of sales increased 4.7% from the year-ago quarter to $281.6 million. The cost of sales represented 46.1% of net sales. Gross profit was $328.9 million, down 3.3% from the year-ago quarter. The gross margin contracted 190 basis points (bps) to 53.9%. NDSN suffered the impacts of supply-chain woes and labor shortages.

Selling and administrative expenses increased 0.2% year over year to $184.6 million and represented 30.2% of net sales. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $180.9 million, the margin being 30%. The adjusted operating income in the reported quarter was $154.5 million, decreasing 1.8% year over year. The adjusted operating margin decreased 100 bps to 25%.

Net interest expenses totaled $9.9 million, reflecting a 90.4% increase from the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal first quarter, Nordson’s cash and cash equivalents reached $122 million, decreasing 25.4% from the $163.5 million recorded at the end of the fourth quarter of fiscal 2022. Long-term debt was $595.2 million, reflecting a 72.4% increase from $345.3 million.

In the first three months of fiscal 2023, NDSN generated net cash of $123.3 million from operating activities, down 4.4% from the prior-year figure. Capital invested in purchasing property, plant and equipment totaled $9.3 million, decreasing 25.6% from the year-ago period.

Dividends/Share Buyback

In the first three months of fiscal 2023, Nordson paid out dividends amounting to $37.2 million, up 25.3% from $29.7 million in the same period of the previous year.

Nordson’s treasury purchase shares amounted to $6.9 million in the first three months of fiscal 2023, decreasing from $35 million in the previous year.

Outlook

For fiscal 2023 (ending October 2023), Nordson anticipates adjusted earnings of $8.75-$9.50 per share compared with $8.75-$10.10 per share stated earlier. Sales are expected to increase 0-3% from the previous year’s reported number compared with 1-7% mentioned earlier.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -16.91% due to these changes.

VGM Scores

At this time, Nordson has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.