Nordson (NDSN) Beats Q4 Earnings & Sales, Q1 View Solid

Machinery company Nordson Corporation (NASDAQ:NDSN) reported impressive results for fourth-quarter fiscal 2017 (ended Oct 31, 2017).

Adjusted earnings came in at $1.38 per share, topping the Zacks Consensus Estimate of $1.32 by 4.5%. This was the company’s eighth consecutive quarter of reporting better-than-expected bottom-line results. On a year-over-year basis, the company’s earnings decreased by 1 cent or 0.7%.

For fiscal 2017, Nordson’s adjusted earnings per share were $5.37, beating the Zacks Consensus Estimate of $5.32 by 0.9% and increasing 14.7% from the year-ago tally of $4.68.

Organic Volume & Acquisition Gains Drive Revenues

Nordson’s net sales in the fiscal fourth quarter totaled $573.9 million, increasing 12.7% year over year. The improvement was driven by 2% increase in organic volume, 10% gain from acquired assets and 1% positive impact of currency translation. Also, the top line surpassed the Zacks Consensus Estimate of $543 million by 5.7%.

Backlog was $402 million, up 45% year over year. Orders for the 12-week period ended Aug 13, decreased 2% year over year.

On a regional basis, revenues sourced from the United States grew 24.2% year over year. Businesses in Japan, the Americas and Europe also improved, recording revenue increase of 31.7%, 15.4% and 15.2%, respectively. Top-line results in Asia Pacific declined 5.1%.

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 fourth quarter is provided below:

Adhesive Dispensing Systems segment’s revenues totaled $247.9 million, increasing 5.8% year over year. Results were driven by 4% organic growth and 2% forex gains.

Advanced Technology Systems revenues were $251.7 million, up 29.4% year over year on the back of 4% organic volume growth and 25% gains from acquired assets. Product demand was strong in the electronics end markets of this segment.

Revenues generated from Industrial coating systems fell 7.6% to $74.3 million.

For fiscal 2017, the company’s net sales were $2,067 million, increasing 14.3% year over year. Results were driven by 14.8% volume growth, partially offset by 0.5% negative impact of currency translation. Also, the top line beat the Zacks Consensus Estimate of $2.04 billion.

Margin Suffers From Higher Costs & Expenses

Nordson’s margin profile in the quarter suffered due to rise in cost of sales and operating expenses. Cost of sales increased 11.8% year over year, representing 45.6% of net sales compared with 46% in the year-ago quarter. Selling and administrative expenses, as a percentage of net sales, were 32.6% compared with 32.2% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $149.8 million, increasing 16.4% year over year. Operating profits grew 12.6% year over year while the margin came in at 21.7% versus 21.8% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal fourth quarter, Nordson’s cash and marketable securities were $90.4 million, down from $110.7 million in the previous-quarter end. The company’s long-term debt was $1,256.4 million, below $1,569.7 million exiting the previous quarter.

In the quarter, the company generated net cash of $133.5 million from its operating activities, decreasing 2.2% year over year. Capital spent on addition of property, plant and equipment grew 44.4% to $22.2 million. During the quarter, the company paid dividends of approximately $17.3 million to its shareholders.

Outlook

For first-quarter fiscal 2018, Nordson anticipates sales to increase in the range of 30-34% year over year. Organic volume growth is predicted to increase 15-19%. Acquisition gains will likely lead to 11% sales growth while foreign currency movements will add 4%. Operating margin will likely be 22%. EBITDA is expected to be within $141-$150 million.

GAAP earnings are expected in the range of $1.29-$1.39 per share, including 7 cents of expenses related to acquisition intangible asset amortization.

The company believes that fiscal first-quarter results will benefit from healthy product demand in the electronics and medical end markets of the Advanced Technology segment.

Nordson Corporation Price and Consensus

Nordson Corporation Price and Consensus | Nordson Corporation Quote

Zacks Rank and Key Picks

With a $7.3 billion market capitalization, Nordson currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Kadant Inc. (NYSE:KAI) , Sun Hydraulics Corporation (NASDAQ:SNHY) and Applied Industrial Technologies, Inc. (NYSE:AIT) . While Kadant and Sun Hydraulics sport a Zacks Rank #1 (Strong Buy), Applied Industrial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kadant pulled off an average positive earnings surprise of 20.32% in the last four quarters. Also, earnings estimates for 2017 and 2018 were revised upward in the last 60 days.

Sun Hydraulics delivered an average positive earnings surprise of 9.58% in the trailing four quarters. Also, bottom-line expectations for 2017 and 2018 improved over the past 60 days.

Applied Industrial’s financial performance was impressive, with an average positive earnings surprise of 9.71% in the last four quarters. Also, earnings estimates for fiscal 2018 and fiscal 2019 were revised upward over the last 60 days.

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