Nordson Corporation (NDSN 0.30%) announced stronger-than-expected fiscal first-quarter 2018 results on Thursday after the market closed, highlighting accelerated organic growth and broad-based demand across its product portfolio.
With shares down around 3% on Friday in response -- though still up nearly 30% from last year's lows in late August -- let's take a deeper look at how the adhesive-dispensing specialist kicked off its new year and what investors can anticipate in the months ahead.
Image source: Nordson.
Nordson results: The raw numbers
| Metric |
Fiscal Q1 2018* |
Fiscal Q1 2017 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$550.4 million |
$407.5 million |
35.1% |
|
GAAP net income |
$104.6 million |
$50.0 million |
109.2% |
|
GAAP earnings per share (diluted) |
$1.78 |
$0.86 |
107% |
*For the quarter ending Jan. 31, 2018. Data source: Nordson Corporation.
What happened with Nordson this quarter?
- Revenue growth was driven by 19% organic growth, a 12% contribution from first-year acquisitions, and a favorable 5% impact from foreign currency translation.
- These results compared favorably to Nordson's most recent guidance, which called for revenue growth of 30% to 34% (assuming 15% to 19% organic growth, an 11% contribution from acquisitions, and a 4% currency tailwind).
- GAAP earnings include a $0.37-per-share one-time benefit related to the impact of recent U.S. tax reform, as well as $0.08 per share related to other discrete tax items. On an adjusted basis, Nordson's earnings of $1.35 per share were slightly above the midpoint of guidance for $1.29 to $1.39.
- Adjusted EBITDA increased 50.3% to $141.9 million.
- Revenue by segment included the following:
- 6% growth from adhesive-dispensing systems, primarily driven by currencies, as weakness in polymer processing product lines mostly offset "solid" growth in most other product lines.
- 87% growth from advanced technology systems, including 50% organic volume growth with strength from all product lines, a 33% contribution from acquisitions, and a favorable 4% increase from currencies.
- 7% growth from industrial coating systems, including 3% organic growth led by powder, container, and liquid finishing products, as well as a 3% increase from currencies.
What management had to say
Nordson CEO Michael Hilton stated:
Our team delivered impressive sales, operating profit, diluted earnings per share, and EBITDA in the quarter against very challenging prior year comparisons, where total company organic sales growth was 10%. Demand was robust in most all product lines, led by electronics and medical end markets within the advanced technology systems segment. With this strong top-line growth, Nordson delivered exceptional results for the quarter, where EBITDA margin improved 250 basis points as compared to the prior year's first quarter to 26% of sales.
Looking forward
Based on Nordson's backlog, which increased 24% to $405 million, Nordson expects fiscal second-quarter 2018 sales growth of 9% to 13%. This assumes a change in organic volume of down 3% to up 1%, a 7% contribution from acquisitions, and a 5% favorable impact from currencies. On the bottom line, Nordson anticipates GAAP earnings per diluted share of $1.33 to $1.47.
To be fair, management elaborated that this tempered growth is more a consequence of project timing, as well as the fact that Nordson is lapping strong 9% increase in organic volume in last year's fiscal second quarter.
"We continue to focus our efforts on technology leadership, product-tiering, new applications, and market penetration to drive growth over the long term," Hilton added.
In short -- and contrary to what today's modest stock-price decline might indicate -- there were no significant surprises from Nordson this quarter. Rather, the company continues to take all the right steps to sustain and improve its industry leadership. And I think investors should be more than pleased with its position today.
