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Nordson (NDSN) Gains From Buyouts Despite Segmental Woes

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On Mar 30, we issued an updated research report on Nordson Corporation (NDSN - Free Report) .

Year to date, this Zacks Rank #3 (Hold) stock has lost 19% compared with the industry's decline of 24.3%.

 



 

Existing Business Scenario

Strength in Nordson’s medical product end markets coupled with its growth initiatives and innovation investments are likely to boost organic sales for fiscal 2020. Also, the implementation of the company’s growth-focused framework, Nordson Business System, will likely prove beneficial in the quarters ahead.

In July 2019, the company completed the buyout of Optical Control GmbH. The acquisition has been augmenting electronic solutions product lines under Nordson’s Advanced Technology Systems segment. Moreover, its buyout of Clada Medical Devices (closed in October 2018) strengthened the Advanced Technology Systems segment.

Moreover, the company remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. In fiscal 2019, it paid out dividends worth $82 million to shareholders and repurchased shares worth $115 million. In addition, it paid out dividends worth $21.9 million to shareholders in the first quarter of fiscal 2020 (ended Jan 31, 2020). It is worth mentioning here that in August 2019, the company hiked the quarterly dividend rate by 9%.

However, persistent weakness in Nordson’s Advanced Technology Systems segment on softness in product lines, supporting the electronic end markets, remains concerning. The company expects the weakness to persist in its electronics end markets in the near term.

In addition, over the past few quarters, Nordson has been experiencing escalating costs of sales. Notably, in the last five fiscal years (2015-2019), its cost of sales recorded an increase of 5.4% (CAGR), while selling and administrative expenses increased 4% (CAGR). Also, it recorded a 1.2% year-over-year increase in cost of sales in the first quarter of fiscal 2020.

Key Picks

Some better-ranked stocks from the same space are Graco Inc. (GGG - Free Report) , Tennant Company (TNC - Free Report) and Broadwind Energy, Inc. (BWEN - Free Report) . While Graco and Tennant sport a Zacks Rank #1 (Strong Buy), Broadwind Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco delivered a positive earnings surprise of 0.40%, on average, in the trailing four quarters.

Tennant delivered a positive earnings surprise of 26.60%, on average, in the trailing four quarters.

Broadwind Energy delivered a positive earnings surprise of 10.42%, on average, in the trailing four quarters.

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