Markets

Nordson Corporation Weathers Another Tough Quarter

Nordson Corporation just released fiscal fourth-quarter 2015 results, and at first glance, its numbers don't seem particularly encouraging. But before we understand why the looks of this adhesive-dispensing products company might be deceiving, let's take a closer look at what Nordson accomplished in its latest quarter:

Nordson results: The raw numbers

Metric Fiscal Q4 2015 Actuals Fiscal Q4 2014 Actuals Growth (YOY)
Revenue $446.2 million $468.6 billion -4.8%
Adjusted Net Income $49.6 million $72.1 million -31.2%
GAAP EPS (Diluted) $0.84 $1.13 -25.7%

Data source: Nordson Corporation.

What happened with Nordson this quarter?

  • Revenue was within Nordson's guidance, which called for sales to decline in the range 3% to 7%.
  • Revenue included flat organic growth from the same year-ago period, again within guidance for organic growth in the range of down 1% to up 3%.
  • Revenue also included a 2% increase related to acquisitions, and a 6.8% negative impact from foreign currency exchange.
  • Earnings fell below guidance, which called for GAAP EPS of $1.00 to $1.12.
  • Foreign exchange also negatively affected earnings by $0.15 per share.
  • Excluding one-time charges of $0.11 per share related to severance and restructuring, adjusted earnings fell 17.4% year over year, to $0.95 per share.
  • At Adhesive Dispensing systems:
    • Revenue fell 2% on a reported basis, to $226.9 million, but would have grown 7.9% excluding currencies.
    • Operating profit declined 19.3% year over year, to $46.9 million.

  • At Advanced Technology systems:
    • Revenue declined 9.1% on a reported basis, and fell 6.5% excluding currencies.
    • Operating profit fell 41.9%, to $24.7 million.

  • At Industrial Coating systems:
    • Revenue fell 4.1% on a reported basis, but would have growth 2% excluding currencies.
    • Operating profit fell 15.3%, to $13.9 million.

  • Order rates for the 12-week period ended Dec. 6, 2015 fell 5% year over year at constant currency. This includes 7% growth at Adhesive Dispensing, and declines of 16% and 14% at Advanced Technology and Industrial Coating systems, respectively.
  • Backlog at the end of the quarter grew 8% year over year, to $229 million, including 5% organic growth and 3% growth from acquisitions.
  • The company spent $196 million to repurchase shares.
  • It generated free cash flow before dividends of $80 million, down 10.7% year over year.

What management had to say

Nordson CEO Michael Hilton stated:

As we begin 2016, we will continue to target organic growth that exceeds global GDP, driven by our ongoing initiatives around new products, new applications, penetration of emerging markets, and recapitalization of our installed base. The diverse set of end markets we serve are expected to grow over the long term and we are well positioned to meet customer needs with global direct sales and service.

Looking forward

For the current quarter, Nordson expects sales to be in the range of down 1% to down 5% year over year, including organic volume down 3% to up 1%, 3% growth from acquisitions, and a 5% negative impact from foreign exchange. That should translate to GAAP earnings per diluted share of $0.47 to $0.57, including a $0.03 per-share charge from non-recurring items, and a roughly $0.08 per share negative impact from currency translation based on current exchange rates.

Hilton explained that the forecast reflects typical seasonality and difficult year-over-year comparisons. But in the meantime, as Nordson continues to weather the current weak macroeconomic environment, Hilton also reminded investors that Nordson initiated cost-cutting efforts last quarter with the aim of improving normalized operating margin beginning in 2016, regardless of any supplemental benefit the company is able to achieve through sales-volume leverage.

In the end, while Nordson's results might not seem positive on the surface, investors should keep in mind that the company's primary antagonists -- namely, macroeconomic and currency headwinds -- are temporary in nature, and not indicative of broader problems with Nordson's underlying business. As Nordson works to improve its operational efficiency and continues to reward investors through dividends and repurchases, it should emerge stronger than ever when these headwinds eventually abate.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Nordson Corporation Weathers Another Tough Quarter originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Nordson. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

NDSN

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More