Nordson's (NDSN) Q4 Earnings Surpass Estimates, Rise Y/Y

Nordson Corporation NDSN fourth-quarter fiscal 2019 (ended Oct 31, 2019) earnings beat expectations, the positive earnings surprise being 1.1%.

Adjusted earnings, excluding one-time charges and gains, were $1.79 per share, surpassing the Zacks Consensus Estimate of $1.77. Also, the bottom line increased 24.3% from the year-ago figure of $1.44 primarily due to higher sales, fall in net interest expenses and lower share count.

For fiscal 2019, Nordson’s adjusted earnings per share were $5.87, down 1.2% from the year-ago figure of $5.94.

Inside the Headlines

In the reported quarter, Nordson’s sales were $585.5 million, increasing 2.8% year over year. The top line gained from 4% increase in organic volume, partially offset by 1% adverse impact of unfavorable movements in foreign currencies. However, revenues missed the Zacks Consensus Estimate of $605 million. At the quarter end, backlog was $385 million, down 1% year over year.

On a regional basis, revenues from the United States increased 12% year over year to $206.9 million. Revenues generated from Japan increased 7.8% to $37.2 million while that from the Asia Pacific improved 17.3% to $150.9 million. Revenues from Europe decreased 16.5% to $145.9 million and that from the Americas declined 4.7% to $44.5 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 segmental performance for the quarter is provided below:

Adhesive Dispensing Systems’ revenues totaled $253.7 million, increasing 1.1% year over year. The improvement was driven by 3% increase in volume, partially offset by 2% adverse impact of foreign currency translation.

Advanced Technology Systems’ revenues were $249 million, down 0.5% year over year. The fall was due to 1% adverse impact of foreign currency movements, and about 1% decrease in volume.

Revenues generated from Industrial Coating Systems increased 21.3% year over year to $82.8 million. Volume increased 22% while foreign currency movements had a negative impact of 1%.

For fiscal 2019, the company’s sales were $2,194.2 million, decreasing 2.7% year over year.

Nordson Corporation Price, Consensus and EPS Surprise

Nordson Corporation Price, Consensus and EPS Surprise

Nordson Corporation price-consensus-eps-surprise-chart | Nordson Corporation Quote

Margin Details

In the quarter, Nordson’s cost of sales increased 2% to $266.5 million. It represented 45.5% of sales compared with 45.9% in the year-ago quarter. Selling and administrative expenses declined 6.2% to $179.3 million. It represented 30.6% of sales compared with 33.5% a year ago.

Adjusted earnings before interest, tax, depreciation and amortization were $164.8 million, increasing 14.9% year over year.

Operating profit increased 20% to $139.7 million. Margin came in at 23.9% compared with 20.5% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal fourth quarter, Nordson’s cash and marketable securities were $151.2 million, up roughly 58% from $95.7 million as of Oct 31, 2018. The company’s long-term debt decreased 16.3% to $1,075.4 million at the end of fiscal 2019.

In the fiscal fourth quarter, the company generated net cash of $146.5 million from operating activities, down 9.4% year over year. Adjusted free cash flow was roughly $128.7 million, increasing 9%. Capital spent on the addition of property, plant and equipment was $18.2 million.

During the reported quarter, the company paid dividends amounting to $21.8 million.

A day before releasing results, Nordson announced that its board of directors approved payment of a quarterly cash dividend of 38 cents per share to shareholders of record as on Dec 20, 2019. The payment will be made on Jan 7, 2020.

Outlook

For fiscal 2020 (ending October 2020), the company anticipates organic sales to grow in the range of 1-3%. The effective tax rate is estimated to be about 22%.

Zacks Rank & Key Picks

Nordson currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space are Dover Corporation DOV, DXP Enterprises, Inc. DXPE and Standex International Corporation SXI. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover delivered average positive earnings surprise of 6.70% in the trailing four quarters.

DXP Enterprises delivered average positive earnings surprise of 17.67% in the trailing four quarters.

Standex International’s earnings surprise in the last reported quarter was 2.11%.

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