Wells Fargo On Nordson: Margin Targets Not Reflective Of Cyclical Upside

Nordson Corporation NDSN reported Q4 EPS short of expectations, but announced positive guidance for 2019.

The Analyst

Wells Fargo’s Allison Poliniak-Cusic maintains a Market Perform rating on Nordson, lowering the price target to $130 from $135.

The Thesis

Nordson announced Q4 EPS at $1.44, missing the $1.49 estimate, despite a 9-cent per share contribution from a lower tax rate. As expected, the results reflected the company’s focus on international operations, auto weakness and tough mobile comps.

The stock moved higher Thursday, which follows the nearly 18-percent decline in share price over the past three months and reflects the positive guidance announced by the company. Poliniak-Cusic said management made the right decision to move from quarterly to annual guidance and projected growth across all three segments in FY2019.

The positive moves by Nordson include deleveraging, increase in FY2018 investment to consolidate its Adhesive Dispensing facilities, ERP installs to make its Advanced Technology segment more scalable, which could be a source of future M&A, Poliniak-Cusic stated.

The analyst reduced the EPS estimates for Nordson from $6.75 to $6.55 for FY19 and from $7.00 to $6.95 for FY20.

Price Action

Nordson shares traded around $118.72 at time of publication Friday.