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Nordson (NDSN) Q3 Earnings Match Estimates, Decline Y/Y

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Nordson Corporation (NDSN - Free Report) reported flat bottom-line results for third-quarter fiscal 2018 (ended Jul 31, 2018).

Adjusted earnings in the reported quarter were $1.60 per share, in line with the Zacks Consensus Estimate. On a year-over-year basis, the company’s earnings declined 10.1% from the year-ago tally of $1.78.

Decline in Organic Volumes Affects Revenues

In the reported quarter, Nordson’s net sales were $581.2 million, decreasing 1.4% year over year. The poor performance was due to 3% decline in organic volumes, partially offset by 1% forex gains and 1% benefit from acquired assets. Moreover, the top line lagged the Zacks Consensus Estimate of $590 million by 1.5%.

At the quarter end, backlog was $428 million, up 16% year over year.

On a regional basis, revenues, sourced from the United States, increased 4.7% year over year to $191.5 million. Revenues generated from operations in Japan declined 31.6% to $28.4 million while that from the American operations decreased 6.5% to $38.96 million. Sales in Europe improved by 12.6% to $150.7 million and that in the Asia Pacific declined 9.4% to $171.7 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:

The Adhesive Dispensing Systems segment’s revenues totaled $244.7 million, increasing 4.9% year over year. Results were driven by 3.4% volume growth and 1.5% forex gains.

Advanced Technology Systems’ revenues were $266.6 million, down 8.2% year over year. The fall was due to 8.9% decline in volumes, partially offset by 0.7% forex gains.

Revenues generated from Industrial coating systems grew 6.5% to $69.9 million. Volumes grew 5.7% and foreign currency movements had a positive impact of 0.8%.

Margin Weak on Higher Expenses

In the quarter under review, Nordson’s cost of sales declined 0.9% year over year to $260.8 million. It represented 44.9% of net sales versus 44.6% in the year-ago quarter. Selling and administrative expenses increased 7% year over year while as a percentage of net sales expenses were 31.8% versus 29.3% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review were $163.4 million, decreasing 10.1% year over year. Operating profits declined 11.7% year over year to $135.6 million while the margin came in at 23.3% versus 26% in the year-ago quarter.

Balance Sheet & Cash Flow
 
Exiting the fiscal third quarter, Nordson had cash and marketable securities of $266.8 million, up 71.15 from $155.9 million in the previous quarter end. The company’s long-term debt increased 15.9%, sequentially, to $1,521.4 million.

In the fiscal third quarter, the company generated net cash of $130.6 million from its operating activities, reflecting year-over-year growth of 68.5%. Capital spent on the addition of property, plant and equipment decreased 42% to $12.9 million. Adjusted free cash flow was $117.8 million, increasing 106.1% year over year.

During the reported quarter, the company paid dividends of approximately $17.4 million to its shareholders.

Outlook

For fourth-quarter fiscal 2018 (ending October 2018), Nordson anticipates sales to be flat year over year to decline 4%. Organic volume growth is predicted to range from    3% fall to 1% growth. Acquisition gains will likely add 1% sales growth while foreign currency movements will have an adverse 2% impact.

Operating margin will likely be 22% while EBITDA is expected to be $143-$155 million. EBITDA margin is predicted to be roughly 26%. The tax rate is estimated to be 25%. GAAP earnings are expected to be $1.38-$1.54 per share.

For fiscal 2018, Nordson anticipates organic revenues to grow roughly 2%.

Nordson Corporation Price and Consensus
 

Nordson Corporation Price and Consensus | Nordson Corporation Quote

Zacks Rank and Key Picks

With $7.8-billion market capitalization, Nordson currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Altra Industrial Motion Corp. (AIMC - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and Barnes Group Inc. (B - Free Report) . While Altra Industrial Motion sports a Zacks Rank #1 (Strong Buy), both Chart Industries and Barnes Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for each of these stocks improved for the current year and the next year. The average positive earnings surprise for the last four quarters was 4.01% for Altra Industrial Motion, 29.36% for Chart Industries and 6.88% for Barnes Group.

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