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Why Is Nordson (NDSN) Down 6.2% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Nordson Corporation (NDSN - Free Report) . Shares have lost about 6.2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is NDSN 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.

First-Quarter Fiscal 2018 Highlights

Nordson Corporation reported flat bottom-line results for first-quarter fiscal 2018 (ended Jan 31, 2018).

Adjusted earnings in the quarter came in at $1.35 per share, matching Zacks Consensus Estimate. On a year-over-year basis, the company's earnings surged 57% from the year-ago tally of 86 cents.

Revenues Increase From Volume Growth & Forex and Buyout Gains

In the quarter, Nordson's net sales were $550.4 million, increasing 35.1% year over year. The improvement was driven by 30.4% gain from organic volume growth and benefits from acquired assets and 4.7% positive impact of currency translation.

Also, the top line surpassed the Zacks Consensus Estimate of $538.1 million by 2.3%.

At the quarter-end, backlog was $405 million, up 24% year over year.

On a regional basis, revenues, sourced from the United States, increased 32.1% year over year to $165.8 million. Revenues generated from operations in Japan surged 172.4% to $65.9 million while that from the American operations grew 14.1% to $34.3 million. Sales in Europe improved by 19.1% to $141.9 million and that in the Asia Pacific expanded 31.3% to $142.5 million.

The company reports its top-line results under three segments, namely, Adhesive Dispensing Systems, Advanced Technology Systems and Industrial Coating Systems. A brief discussion on the segmental performance in the fiscal first-quarter is provided below:

Adhesive Dispensing Systems segment's revenues totaled $220.9 million, increasing 6.3% year over year. Results were driven by 0.6% organic growth and 5.7% forex gains.

Advanced Technology Systems revenues were $271.7 million, up 86.9% year over year on the back of 83.3% organic volume growth and 3.6% gains from favorable foreign currency movements. Product demand was strong in the medical and electronics end markets.

Revenues generated from Industrial Coating Systems grew 6.6% to $57.9 million.

Margin Improves Despite Higher Costs & Expenses

In the quarter, Nordson's cost of sales increased 36.8% year over year to $249.4 million. It represented 45.3% of net sales versus 44.7% in the year-ago quarter. Selling and administrative expenses, as a percentage of net sales, were 33.3% compared with 36.6% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $141.9 million, increasing 50.3% year over year. Operating profits grew 55.1% year over year while the margin came in at 21.4% versus 18.6% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal first-quarter, Nordson had cash and marketable securities of $132.8 million, up from $90.4 million in the previous-quarter end. The company's long-term debt was $1,258.8 million, slightly above $1,256.4 million exiting the previous quarter.

In the first quarter, the company's net cash flow from operating activities totaled $109.3 million, up 34.7% year over year. Capital spent on the addition of property, plant and equipment grew 65.5% to $16.7 million. During the quarter, the company paid dividends of approximately $17.3 million to its shareholders.

Outlook

For second-quarter fiscal 2018, Nordson anticipates sales to increase in the range of 9-13% year over year. Organic volume growth is predicted to range from 3% fall to 1% growth. Acquisition gains will likely add 7% sales growth while foreign currency movements will benefit by 5%. Operating margin will likely be 22%. EBITDA is expected to be within $143-$154 million. The tax rate is estimated to be 25%.

GAAP earnings are expected in the range of $1.33-$1.47 per share, including 8 cents of expenses related to intangible asset amortization.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

Nordson Corporation Price and Consensus

 

Nordson Corporation Price and Consensus | Nordson Corporation Quote

VGM Scores

At this time, NDSN has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% 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.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

NDSN has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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