A month has gone by since the last earnings report for Nordson (NDSN). Shares have lost about 33.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Nordson’s Q1 Earnings and Revenues Miss Estimates
Nordson reported weaker-than-expected first-quarter fiscal 2020 (ended Jan 31, 2020) results, wherein both earnings and revenues missed the Zacks Consensus Estimate.
Adjusted earnings, excluding one-time charges and gains, were 89 cents per share, missing the consensus estimate of $1.05. Also, the bottom line decreased 3.3% from the year-ago figure of 92 cents, primarily on account of to lower sales.
Inside the Headlines
In the reported quarter, Nordson’s sales were $494.9 million, declining 0.6% year over year. The decline was attributable to about 1% decrease in organic volume and 1% adverse impact of unfavorable movements in foreign currencies. Revenues missed the Zacks Consensus Estimate of $499 million. At the quarter end, backlog was $430 million, down 1% year over year.
Region wise, revenues from the United States increased 10.7% year over year to $188.5 million. Revenues generated from Japan decreased 4.8% to $27.6 million and that from Asia Pacific declined 9% to $121.4 million. Revenues from Europe fell 4.7% to $126.4 million and that from the Americas declined 4% to $31.1 million.
The company reports top-line results under three segments — Adhesive Dispensing Systems, Advanced Technology Systems and Industrial Coating Systems. A brief discussion on the fiscal first-quarter segmental performance is provided below:
Adhesive Dispensing Systems’ revenues totaled $207.2 million, decreasing 2% year over year. The decline was due to 1% fall in volume and 1% adverse impact of foreign currency translation.
Advanced Technology Systems’ revenues were $231.1 million, down 1.4% year over year. The fall was on account of 2% decrease in volume and about 1% adverse impact of foreign currency movements, partially offset by contribution of 1% from acquired assets.
Revenues generated from Industrial Coating Systems increased 8.9% year over year to $56.6 million. Volume increased 9% while foreign currency movements had a negative impact of about 1%.
In the quarter, Nordson’s cost of sales increased 1.2% to $231.7 million. It represented 46.8% of sales compared with 46% in the year-ago quarter. Selling and administrative expenses increased 1.8% to $188.1 million. It represented 38% of sales compared with 37.1% a year ago.
Earnings before interest, tax, depreciation and amortization were $100.9 million, decreasing 6.4% year over year.
Operating profit decreased 10.9% to $75.1 million. Margin came in at 15.2% compared with 16.9% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the fiscal first quarter, Nordson’s cash and cash equivalents were $115.1 million, down 23.9% from $151.2 million as of Oct 31, 2019. The company’s long-term debt decreased 0.1% to $1,074.3 million on a sequential basis.
In the first three months of fiscal 2020, the company generated net cash of $116.3 million from operating activities compared with $56.8 million in the year-ago period.
In the reported quarter, free cash flow was roughly $102.5 million, up from around $43 million a year ago. Capital spent on the addition of property, plant and equipment was $13.9 million. During the quarter, the company paid out dividends of $21.9 million.
For fiscal 2020 (ending October 2020), the company anticipates organic sales to grow in the range of 1-3%.
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 -5.08% due to these changes.
Currently, Nordson has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.