Nordson (NDSN) Third Quarter Earnings and Revenue Beat Estimates – August 23, 2022

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Nordson Company (NDSN Free Report) reported better-than-expected results for the third quarter of fiscal 2022 (ended July 31, 2022), in which earnings beat Zacks’ consensus estimate by 1.6% and sales topped the same level of 1.5%.

NDSN’s adjusted earnings were $2.49 per share in the current quarter, beating Zacks’ consensus estimate of $2.45. Net income increased 2.9% from $2.42 in the prior year fiscal quarter.

Income Details

In the current quarter, Nordson’s revenue was $662.1 million, reflecting a 2.4% increase over the year-ago fiscal quarter. Revenue topped Zacks’ consensus estimate of $652 million.

Organic sales increased by 3.9%, driven by healthy end-market activities, mainly in medical and electronics. Acquisitions/disposals had a positive impact of 3.5% while foreign currency translation had a negative impact of 5%.

On a regional basis, revenues from the United States increased 8.7% over the level of the fiscal quarter last year to reach $219.1 million. Revenue from operations in Japan fell 7.5% to $23.1 million, while revenue from the Asia-Pacific region fell 1% to $208.2 million. Revenue generated from Europe decreased 6.6% to $151.7 million, while the metric in the Americas increased 26% to $60.1 million.

Nordson records revenue in two segments, namely Industrial Precision Solutions and Advanced Technology Solutions. A brief overview of sales by segment is provided below:

Industrial Precision Solutions revenue was $341.2 million in the quarter under review, down 1.2% from the level of the fiscal quarter last year. The segment contributed 51.5% of NDSN’s revenue in the quarter.

Organic sales fell 1.1% from the year-ago fiscal quarter level. Acquisitions/disposals had a positive impact of 6.5%, while foreign currency translation had a negative impact of 6.6%.

Advanced Technology Solutions sales were $320.9 million, up 6.5% from the fiscal quarter last year. The measure accounted for 48.5% of Nordson’s revenue during the period.

Organic sales increased by 9.6% compared to the level of the fiscal quarter last year, while foreign currency translation had a negative impact of 3.1%.

Margin profile

In the current quarter, Nordson’s cost of sales increased 5.3% from the level of the fiscal quarter last year to $296.5 million. The cost of sales represents 44.8% of sales. Gross profit was $365.6 million, up 0.1% from the level of the fiscal quarter last year.

Gross margin contracted by 130 basis points (bps) to 55.2%. The NDSN has been adversely affected by supply chain issues and labor shortages.

Selling and administrative expenses increased 2.1% year over year to $180.7 million and represented 27.3% of net sales. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $213.2 million, with a margin of 32%.

Adjusted operating profit in the reported quarter was $188.3 million, flat year-over-year. Adjusted operating margin decreased by 70 basis points to 28.4%.

Net interest expense totaled $5.2 million, reflecting a 7.1% decrease from the prior year quarter level.

Balance sheet and cash flow

At the time of the fiscal third quarter exit, Nordson’s cash and cash equivalents were $128.7 million, down 57.1% from $300 million at the end of the fourth quarter of fiscal 2021. Long-term debt was $401.7 million, reflecting a 48.6% decline from $781.7 million.

In the first nine months of fiscal 2022, NDSN generated $339.7 million of net cash from operating activities, down 9.5% from the comparable prior year period . Capital invested in the purchase of property, plant and equipment totaled $39.4 million, up 40.2% from last year.

Dividends/repurchase of shares

In the first nine months of fiscal 2022, Nordson paid dividends of $88.7 million, up 30.4% from $68 million in the same fiscal period previous.

Nordson’s purchase of treasury stock was $233.8 million in the first nine months of fiscal 2022, compared to $46.8 million in the same period last year .

Outlook

Nordson expects strong orders and backlog (over $1 billion) to benefit the third quarter of fiscal 2022. Pricing actions will also help mitigate supply chain impacts and issues of costs.

For fiscal 2022 (ending October 2022), Nordson expects adjusted earnings to grow 18-21% from the prior year level. Sales are expected to increase 8-9% from the reported figure for the prior year.

Zacks Ranking and Stocks to Consider

Nordson currently has a Zacks rank of #3 (Hold). Some top-ranked companies in the industrial products sector are featured below:

Applied Industrial Technologies, Inc. (AIT Free Report) currently sports a Zacks Rank #1 (Strong Buy). AIT delivered a four-quarter earnings surprise of 22.8% on average. You can see the full list of today’s Zacks #1 Rank stocks.

AIT’s earnings estimates have risen 5.8% for fiscal year 2023 (ending June 2023) in the last 60 days. Its shares are up 15% in the past six months.

Greif, Inc. (WEF Free Report) currently has a Zacks Rank #2 (Buy). The WEF generated a profit surprise over the last four quarters of 22.9% on average.

WEF earnings estimates have increased by 0.4% for fiscal year 2022 (ending October 2022) in the last 60 days. Its shares are up 23.4% over the past six months.

Valmont Industries, Inc. (VMI Free Report) currently has a Zacks ranking of 2. VMI’s earnings surprise over the past four quarters was 13.7%, on average.

Over the past 60 days, Valmont’s earnings estimates have risen 3.8% for 2022. The stock has risen 34.1% over the past six months.

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