It has been about a month since the last earnings report for Nordson (NDSN). Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

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

Nordson's Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Nordson’s first-quarter fiscal 2024 (ended Jan 31, 2024) adjusted earnings of $2.21 per share surpassed the Zacks Consensus Estimate of $2.03. The bottom line increased 13.3% year over year.

Revenue Details

In the reported quarter, Nordson’s revenues were $633.2 million, increasing 3.7% from the year-ago fiscal quarter’s number due to solid momentum in the Industrial Precision Solutions and Medical and Fluid Solutions segments. Revenues beat the Zacks Consensus Estimate of $630 million.

Organic sales declined 2.2% year over year due to softness in electronics product lines. Acquisitions/divestitures had a positive impact of 5.4% while foreign currency translation had a positive impact of 0.5%.

On a regional basis, revenues from the Asia Pacific region decreased 1.5% year over year to $179.9 million. Revenues generated from Europe increased 10% to $179.3 million while the metric in the Americas increased 3.4% to $274 million.

Nordson started reporting revenues under three segments effective Aug 1, 2022. The segments are Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions. A brief snapshot of the segmental sales is provided below:

Revenues from Industrial Precision Solutions amounted to $354.5 million in the quarter under review, up 13.8% from the year-ago fiscal quarter’s level. The segment contributed 56% to NDSN’s top line in the quarter.

Organic sales increased 2.3% from the year-ago fiscal quarter’s level. Foreign currency translation had a positive impact of 0.9%.

Revenues from Medical and Fluid Solutions amounted to $159.5 million in the quarter under review, up 3.4% from the year-ago fiscal quarter’s level. The segment contributed 25.2% to NDSN’s top line in the reported quarter.

Organic sales increased 3.1% from the year-ago fiscal quarter’s level. Foreign currency translation had a positive impact of 0.3%.

Advanced Technology Solutions’ sales were $119.1 million, down 17.6% from the year-ago fiscal quarter’s figure. The metric represented 18.8% of Nordson’s revenues in the period.

Organic sales decreased 17.6% from the year-ago fiscal quarter’s level.



Margin Profile

In the reported quarter, Nordson’s cost of sales increased 1.1% from the year-ago fiscal quarter’s level to $284.8 million. Gross profit was $348.4 million, up 6% from the year-ago fiscal quarter’s level. The gross margin increased 110 basis points (bps) to 55%.

Selling and administrative expenses increased 2.4% year over year to $189 million. EBITDA was $197 million, the margin being 31%. Operating income in the reported quarter was $159.4 million, increasing 10.6% year on year. The adjusted operating margin of 25.2% increased 160 bps from the year-ago period.

Net interest expenses totaled $20.4 million, reflecting a 105.2% increase from the year-ago fiscal quarter’s level.

Balance Sheet & Cash Flow

At the time of exiting the first quarter of fiscal 2024, Nordson’s cash and cash equivalents were $136.2 million compared with $115.7 million recorded at the end of the fourth quarter of fiscal 2023. Long-term debt was $1.5 billion compared with $1.6 million recorded at the end of the fourth quarter of fiscal 2023.

In the first three months of fiscal 2024, NDSN generated net cash of $172.4 million from operating activities, up 39.7% from the last fiscal year’s tally. Capital invested in purchasing property, plant and equipment totaled $7.5 million, decreasing 19.1% from the year-ago fiscal period.

Dividends/Share Buyback

In the first three months of fiscal 2024, Nordson paid out dividends amounting to $38.9 million, up 4.5% from $37.2 million in the same period of the previous fiscal year.

Nordson’s treasury purchase shares amounted to $7.4 million in the first three months of fiscal 2024, increasing from $6.9 million in the last fiscal year.

Outlook

For the second quarter of fiscal 2024, NDSN expects sales in the range of $645-$670 million and adjusted earnings in the range of $2.20-$2.35 per share.

For fiscal 2024 (ending October 2024), Nordson anticipates adjusted earnings of $10.00-$10.50 per share. The Zacks Consensus Estimate for the same is $10.08 per share. Sales are expected to increase 4-7% from the previous fiscal year’s reported number.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -6.63% due to these changes.

VGM Scores

Currently, Nordson has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nordson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Nordson is part of the Zacks Manufacturing - General Industrial industry. Over the past month, Middleby (MIDD), a stock from the same industry, has gained 3.9%. The company reported its results for the quarter ended December 2023 more than a month ago.

The Middleby reported revenues of $1.01 billion in the last reported quarter, representing a year-over-year change of -2.2%. EPS of $2.65 for the same period compares with $2.57 a year ago.

The Middleby is expected to post earnings of $2.03 per share for the current quarter, representing a year-over-year change of -7.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.8%.

The Middleby has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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