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Why is Nordson (NDSN) up 5.5% since its last earnings report?

A month has passed since Nordson’s (NDSN) last earnings report. Shares have risen about 5.5% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nordson facing a pullback? 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 key drivers.

Nordson’s first-quarter earnings and revenues beat estimates

Nordson announced better-than-expected results for the first quarter of fiscal year 2021 (ended January 31, 2021). Quarterly earnings and sales surpassed the Zacks Consensus Estimate by 24.5% and 3.5%, respectively.

Adjusted earnings, excluding one-time charges and gains, were $1.32 per share in the reported quarter, beating the consensus estimate of $1.06. The bottom line increased 48% from the previous year of 89 cents, driven by sales growth.

Revenue details

For the reported quarter, Nordson net sales were $527 million, up 6% year-over-year. The financial result was driven by a 3% improvement in organic volumes and a 3% positive impact from foreign currency translation and acquisitions. Notably, earnings surpassed the Zacks Consensus Estimate of $509 million.

At the end of the reported quarter, the backlog was $495 million.

Regionally, U.S. revenues declined 1.7% year-over-year to $185.3 million. Revenues generated from operations in Japan decreased 1.6% to $27.1 million, while revenues from the Asia-Pacific region increased 17.7% to $142.8 million. Revenues generated in Europe increased by 6.9% to $135.2 million and in the Americas by 16.3% to $36.1 million.

The company reports in the categories Industrial Precision Solutions and Advanced Technological Solutions. Below is a brief overview of the segment’s performance for the quarter:

Industrial Precision Solutions segment revenues were $288.4 million, up 9.3% year-over-year. The segment benefited from a 6% increase in volumes and a 3% positive impact on foreign currency translation.

Advanced Technology Solutions’ revenues were $238.2 million, up 3% year-over-year. This growth was supported by a 2% positive impact from acquisitions and a 2% positive impact from foreign currency translations, partially offset by a 1% decline in volumes.

Margin profile

In the fiscal first quarter, Nordson’s cost of sales increased 2% to $236.6 million year-over-year. This represented 44.9% of net sales in the quarter compared to 46.8% in the year-ago quarter. Selling and administrative expenses decreased 3.8% to $180.9 million. This represented 34.4% of net sales in the reported quarter compared to 38% in the year-ago quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $135 million, an increase of 26.2%.

Adjusted operating profits increased 39% to $109 million and margin was 20.7% compared to 15.8% in the year-ago quarter.

Balance sheet and cash flow

At the end of the first fiscal quarter, Nordson’s cash and cash equivalents were $225.7 million, compared to $208.3 million at the end of the prior quarter. The company’s long-term debt decreased sequentially by 8.1% to $981.3 million.

In the first three months of fiscal 2021, the company generated net cash from operations of $143.3 million, reflecting year-over-year growth of 23.2%. Capital spent on the expansion of property, plant and equipment decreased 43.2% to $7.9 million.

During the first three months of fiscal year 2021, the company allocated $5.3 million for share repurchases and paid a dividend of $22.7 million.

Perspectives

For fiscal year 2021 (ended January 2022), Nordson expects adjusted earnings to grow 15% to 22% year-over-year. For the fiscal year, the company expects year-on-year sales growth of 4-6%.

How have estimates changed since then?

It turns out that the estimate review has been trending downward over the past month.

VGM results

Currently, Nordson has a strong Growth Score of A, although it lags well behind its Momentum Score of C. Plotting a somewhat similar path, the stock is rated D on the value side, placing it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Nordson carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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