Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Nordson Slumps on Soft Organic Sales

By Steve Symington - Updated Apr 23, 2019 at 3:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The adhesive-dispensing systems company started fiscal 2019 on a slow note. Here's what investors need to know.

Nordson ( NDSN 1.54% ) announced fiscal first-quarter 2019 results on Wednesday after the market closed, detailing an expected revenue decline -- and a more pronounced drop in earnings -- against a tough comparison to the exceptional organic growth it achieved in the same year-ago period.

With shares down around 2.7% on Thursday in response, let's dig deeper into how the adhesive-dispensing systems company kicked off its new year.

Adhesive-dispensing system working on semiconductor chips.

IMAGE SOURCE: NORDSON.

Nordson results: The raw numbers

Metric

Fiscal Q1 2019*

Fiscal Q1 2018

Year-Over-Year Growth

Revenue

$497.9 million

$550.4 million

(9.5%)

GAAP net income

$48.6 million

$104.6 million

(53.5%)

GAAP earnings per share (diluted)

$0.83

$1.78

(53.4%)

Data source: Nordson. *For the quarter ended Jan. 31, 2019. GAAP = generally accepted accounting principles.

What happened with Nordson this quarter?

  • On an adjusted (non-GAAP) basis, which excludes one-time charges like restructuring expenses and discrete tax items, Nordson's earnings were $0.92 per diluted share, down from $1.35 in the same year-ago period.
  • Nordson management decided last quarter to stop providing specific quarterly financial guidance. So for perspective, and though we don't usually pay close attention to Wall Street's demands -- most analysts were modeling higher adjusted earnings of $1.12 per share on roughly the same revenue. 
  • The change in revenue was comprised of a 9% decline in organic volume, a 1% contribution from acquisitions, and a 2% foreign-currency headwind.
  • Adjusted EBITDA declined 24%, to $107.8 million.
  • Revenue by segment included:
    • A 4.2% decline from adhesive-dispensing systems, to $211.5 million, including a 1.6% organic volume decline.
    • A 13.7% drop from advanced technology systems, to $234.5 million, including a 12.4% organic decline.
    • An 8.6% decline from industrial coating systems, to $51.9 million, including an 8.6% drop in organic volume.
  • Nordson's backlog grew 9% year over year, to $439 million.
  • Nordson repurchased 856,000 shares during the quarter for $102 million.

Check out the latest Nordson earnings call transcript.

What management had to say

"Given the difficult comparisons to the strong first quarter of fiscal 2018, where total company organic sales growth was 19 percent, this quarter's performance was in line with our expectations for a more typical seasonal pattern of sequential quarterly sales growth," stated Nordson CEO Michael Hilton. "As our spending is generally consistent throughout the year, segment operating margins in the quarter were impacted by the decline in sales."

Looking forward

For the full fiscal-year 2019 -- and with the caveat that Nordson is continuing to "monitor macroeconomic challenges, as well as the resolution of the international tariff legislation" -- the company reiterated its guidance for organic sales volume growth of 3% to 5%. Nordson further reaffirmed its targets for fiscal 2019 adjusted operating margin and adjusted EBITDA margin to expand by 100 to 150 basis points year over year.

In the end, however unimpressive Nordson's headline numbers appeared, this marked an uneventful performance against a difficult comparison for the company. But given its bottom-line shortfall relative to expectations as its sales decline translated to lost operating leverage, it's no surprise to see Nordson stock down modestly today in response.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nordson Corporation Stock Quote
Nordson Corporation
NDSN
$264.11 (1.54%) $4.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.