Nordson (NDSN 1.40%) announced strong fiscal fourth-quarter 2018 results on Wednesday after the market closed. The adhesive-dispensing systems leader highlighted modest organic growth from its two largest segments even over its exceptional showing in the same year-ago period, as well as strategic investments made with a long-term mindset.
With shares gaining ground in after-hours trading, let's take a closer look at how Nordson capped the fiscal year, and what shareholders should anticipate in the coming quarters.
Image source: Nordson.
Nordson results: The raw numbers
| Metric |
Fiscal Q4 2018* |
Fiscal Q4 2017 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$569.3 million |
$573.9 million |
(0.8%) |
|
GAAP net income |
$86.7 million |
$79.8 million |
8.6% |
|
GAAP earnings per share (diluted) |
$1.47 |
$1.37 |
7.3% |
Data source: Nordson. *For the quarter ended Oct. 31, 2018.
What happened with Nordson this quarter?
- GAAP earnings were well within Nordson's guidance provided in August for a per-share range of $1.38 to $1.54.
- On an adjusted (non-GAAP) basis -- which accounts for both a $0.04-per-share restructuring charge and discrete tax benefits of $0.07 per share -- Nordson's earnings climbed 4.3% year over year to $1.44 per share.
- The top line was near the high end of Nordson's guidance provided in August, which called for revenue to be flat to down 4%.
- Nordson's change in revenue consisted of a 1% decline in organic volume, versus guidance for up 1% to down 3%; a 1% positive contribution from acquisitions, in line with expectations; and a 1% foreign-currency headwind, versus guidance for a heavier 2% impact.
- Adjusted EBITDA was roughly flat year over year at $146 million.
- Revenue by segment included:
- 1.2% growth from adhesive dispensing systems, to $250.8 million, including 3.3% organic volume growth.
- A 0.6% decline from advanced technology systems, to $250.2 million, including 0.2% organic volume growth.
- An 8.2% decline from industrial coating systems, to $68.2 million, including a 7% decline in organic volume.
- Full-year organic volume increased 2.5%.
- Backlog declined 1% year over year to $394 million, including a 3% organic decline and a 2% contribution from acquisitions.
What management had to say
Nordson CEO Michael Hilton stated:
Despite tough comparisons to the prior year's fourth quarter, Nordson delivered solid results. Reported operating margin in the current quarter was negatively impacted by certain long-term investments, including facility consolidation efforts within the adhesives segment and costs related to the
launch of our new centralized shared service center in the United States. These investments will benefit both our customers and shareholders over the long term.
Looking forward
Hilton added that the company continues to diversify "into more steady growth end-markets" and said "we have consistently delivered annual organic sales volume growth."
To that end, Nordson expects organic sales volume in the new fiscal 2019 to climb 3% to 5% year over year -- roughly in line with consensus expectations -- partially offset by a 2% foreign-currency headwind, assuming exchange rates remain consistent. Nordson also predicts that its adjusted operating margin and adjusted EBITDA margin will expand by roughly 100 to 150 basis points over fiscal 2018.
"We are forecasting that the strength of our end markets and our ability to execute on our growth initiatives will enable another year of solid organic sales growth in fiscal 2019, recognizing that the first quarter faces a very challenging comparison," Hilton elaborated.
All told, this quarter may not raise the eyebrows of many growth-hungry investors in today's market. But there was little not to like about this quarter relative to its promises in August, and Nordson seems to be taking steps in the right direction to cement its industry leadership and resume sustained, profitable growth.
