Market Overview

Nordson Earnings Preview: Double-Digit Sales and Profit Growth Expected


Nordson (NASDAQ: NDSN) is scheduled to report third-quarter fiscal 2011 results today, August 18, after the closing bell. While the industrial equipment maker posted record second-quarter results, the outlook for the third quarter disappointed analysts and some investors at the time.

Now, analysts are looking for the company to report earnings of $0.89 per share, which compares to $0.66 in the same period of last year. That EPS estimate is the same as it was 60 days ago. But note that analysts have underestimated Nordson's per-share earnings, by as much as a dime, in recent quarters.

The analysts' forecast also calls for the company to post revenues of $323.2 million. That would be an increase of 15.8% from a year ago, as well as up from the $318.9 million in revenues reported in the second quarter.

Looking ahead to the next quarter, analysts so far are looking for sequential and year-over-year growth of both per-share earnings and revenues. And the forecast for the full year calls for EPS up 32.1% year over year and revenue up 19.3%.

The Company

Ohio-based Nordson's Adhesive Dispensing Systems segment manufactures equipment for applying adhesives, lotions and liquids to disposable products. Its Advanced Technology Systems segment produces treatment systems used to clean and condition surfaces for the semiconductor and printed circuit board industries. And its Industrial Coating Systems segment provides automated and manual dispensing systems used for applying coatings, finishes, sealants and other materials. The company was founded in 1929 and now has a market cap of $3.0 billion.

During the three months that ended in July, the company agreed to acquire Colorado-based Value Plastics and Belgian flexible-packaging maker Verbruggen. The board also authorized the repurchase of up to 2 million shares. Earlier this week, Nordson boosted its dividend 19%, making this the 48th consecutive year of annual dividend increases.


The company has a long-term earnings per share growth forecast of 14.3% and a return of equity of 42.6%. Its forward P/E ratio estimate is less than the trailing P/E ratio of 13.7, and its PEG ratio is 0.9. The dividend yield is 0.9%. Three of seven analysts rate the stock a Buy or Strong Buy, while none rate it a Sell.

The share price has yet to fully recover from the recent sell-off and it is now about 4% lower than at the beginning of the year. Still, shares are trading almost 34% higher than a year ago. Over the past six months, the stock's performance had been in line with the S&P 500 and with competitor 3M (NYSE: MMM), but it has outperformed Illinois Tool Works (NYSE: ITW).

Action Items:

Bullish: Traders interested in exchange traded funds that include Nordson among its holdings might want to consider the following trades:

  • ProShares Ultra Russell2000 Growth (NYSE: UKK): up more than 31% in the past year
  • iShares Russell 2000 Growth Index (NYSE: IWO): up more than 18% in the past year
  • SPDR S&P MidCap 400 (NYSE: MDY): up more than 14% in the past year

Bearish: Traders may want to consider these alternative positions:

  • Direxion Daily Mid Cap Bear 3X Shares (NYSE: MWN): up more than 33% in the past month
  • ProShares UltraShort Russell2000 Growth (NYSE: SKK): up nearly 32% in the past month
  • ProShares UltraShort MidCap400 (NYSE: MZZ): up about 25% in the past month

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