Nordson (NDSN) Stands Out In A Sea Of Red As Broad-Based Strength In Business Leads To Upside Result
2:43 pm Friday, December 16th, 2022
Nordson (NDSN), an industrial company that manufacturers dispensing and coating systems for a variety of applications, is exhibiting impressive relative strength following its upside 4Q22 earnings report. While contending with numerous macro-related challenges, including decades-high inflation, foreign currency headwinds, supply chain constraints, COVID-19 shutdowns, and labor shortages, NDSN still achieved a quarterly sales record of $683.6 mln (+14%). Also, unlike other large industrial companies, such as 3M (MMM) and General Electric (GE), NDSN experienced strength across nearly all of its geographies and product lines.
Breaking the results down by operating segment, Industrial Precision Solutions (dispensing, coating, and laminating systems for adhesives, lotions, liquids, etc.) generated organic sales growth of 16%, with particular strength seen in medical and fluid solutions in the Americas and Europe. NDSN also experienced steady growth in industrial coating products and packaging product lines in the food and beverage industry.
NDSN’s attributes its surprising resilience to a few different factors.
During the earnings call, CFO Joseph Kelley credited the consistent application of the NBS Next growth framework as the key element that continues to fuel consistent profitable growth across the business.
Lastly, over 50% of the company’s sales mix is aftermarket parts and consumables, providing it with a substantial base of recurring revenue.
Overall, it was a solid performance for NDSN, but it wasn’t without a couple flaws. For instance, gross margin decreased by 200 bps yr/yr to 53% as price increases were unable to fully overcome cost inflation. Also, the company’s EPS guidance for Q4 fell short of expectations as a strengthening dollar continues to pressure its bottom-line. The main takeaway, though, is that NDSN is executing admirably in a very difficult environment and that FY23 is shaping up to be a positive year with approximately $1.0 bln residing in its backlog.
