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Nordson Displays Bright Prospects Despite Persistent Risks

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On May 11, we issued an updated research report on Nordson Corporation (NDSN - Free Report) .

In the past six months, this Zacks Rank #3 (Hold) stock has gained 1.2% against the industry’sdecline of 14%.

 

 

Existing Business Scenario

Nordson has been benefiting from strength across its medical end markets coupled with its growth initiatives and innovation investments. Also, the implementation of Nordson Business System, its growth-focused framework, will likely support growth in the quarters ahead.

Also, it remains committed to rewarding shareholders handsomely through dividend payments and share buyback programs. Notably, the company paid out dividends worth $82 million to shareholders and repurchased shares worth $115 million in fiscal 2019 (ended October 2020). Further, it paid out dividends worth $21.9 million to shareholders in the first quarter of fiscal 2020 (ended January 2020). Notably, the company hiked the quarterly dividend rate by 9% in August 2019.

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

However, the company has been experiencing escalating costs of sales over the past few quarters. Notably, in the last five fiscal years (2015-2019), its cost of sales increased 5.4% (CAGR), while selling and administrative expenses increased 4% (CAGR). In addition, in the first quarter of fiscal 2020, the company’s cost of sales grew 1.2% on a year-over-year basis.

Further, continued 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.

Stocks to Consider

Some better-ranked stocks are Intellicheck, Inc. (IDN - Free Report) , AZZ Inc. (AZZ - Free Report) and Berry Global Group, Inc. (BERY - Free Report) . All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intellicheck delivered a positive earnings surprise of 70.24%, on average, in the trailing four quarters.

AZZ delivered a positive earnings surprise of 6.17%, on average, in the trailing four quarters.

Berry Global delivered a positive earnings surprise of 6.63%, on average, in the trailing four quarters.

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