Nordson Corporation (NDSN) reported an impressive result for fiscal second-quarter 2014 (ended Apr 30, 2014). Adjusted earnings came in at 97 cents per share, up 15.5% from earnings of 84 cents recorded in the year-ago quarter. Moreover, the top-line result surpassed the Zacks Consensus Estimate of 90 cents by 7.8%.
Revenues
Nordson Corporation generated revenues of $417.5 million, representing an increase of 9.3% year over year. Organic volume growth was 4.0%, while acquisitions contributed 5.0% and currency translation added 0.1% gain. The top-line result was also above the Zacks Consensus Estimate of $407.0 million.
Backlog was $247.0 million, up 25% from the year-ago quarter. Orders for the 12-week period ended May 18, 2014 increased 9% year over year, on a constant currency basis.
Nordson Corporation reports its top-line results under three segments — Adhesive dispensing systems, Advanced technology systems and Industrial coating systems. A brief discussion on the segmental performance is provided below:
Revenues generated from the Adhesive dispensing systems segment increased 18.1% year over year and represented 55.6% of total revenue. The Advanced technology systems segment, accounting for 30.6% of total revenue, went down by 1.8%. The revenues generated from the Industrial coating systems business increased 3.9% and contributed 13.9% of total revenue.
On a regional basis, revenues generated in the U.S. were up 9.5% year over year. Also, the European and Asia Pacific businesses flourished; recording revenues growth of 23.0% and 9.3% respectively. These positives were, however, offset by Nordson Corporation’s weak performances in Americas and Japan. Revenue generation in these regions decreased by 13.8% and 8.6% respectively.
Margins
Cost of sales increased 10.1% year over year and represented 43.6% of total revenue, up 30 basis points (bps) from the prior-year quarter. Selling and administrative expenses, as a percentage of total revenue, stood at 34.2% versus 35.3% in the year-ago quarter. Operating profits increased 12.9% year over year, while operating margin gained 70 bps and came in at 22.2%.
Balance Sheet
At the end of fiscal second-quarter 2014, Nordson Corporation had cash and marketable securities of $49.7 million versus $46.9 million recorded at the preceding quarter-end. Long-term debt stood at $636.6 million, up 3.8% sequentially.
Cash Flow
Nordson Corporation generated cash of $54.5 million from its operating activities in fiscal second-quarter 2014, reflecting a year-over-year decline of 13.3%. Capital spending went down by 46.9% to $8.6 million. Free cash flow before dividends was $46.0 million, decreasing 1.5% from the year-ago quarter. Cash dividend payments amounted to $11.5 million.
Outlook
For fiscal third-quarter 2014, Nordson Corporation anticipates total revenue to grow in the 9−13% range; comprising of 3−7% organic revenues growth, 5% contribution from acquisitions and 1% gain from foreign currency translation. Operating margin is expected to be roughly 24%.
Non-adjusted earnings are expected to lie in the range of $1.06−$1.16 per share.
Nordson Corporation currently has a $4.8 billion market capitalization and carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the industry include Gorman-Rupp Co. (GRC), Blount International Inc. (BLT) and Illinois Tool Works Inc. (ITW). While Gorman-Rupp sports a Zacks Rank #1 (Strong Buy), both Blount International and Illinois Tool Works hold a Zacks Rank #2.
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