Zacks Investment Research downgraded Nordson Corporation NDSN to a Zacks Rank #5 (Strong Sell) on Sep 11, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market in the near term.
Why the Downgrade?
Nordson Corporation’s disappointing results for third-quarter fiscal 2015 (ended Jul 31, 2015) have led to a 6.8% decline in its share price since then. However, we believe the fall has been partially countered by announcement of a new share buyback program as well as acquisition of Matrix Technologies GmbH.
A brief discussion, that will help justify Nordson Corporation’s weak investment value, has been provided below:
Earnings came in at $1.16 per share, down from the year-ago tally of $1.20 and below the Zacks Consensus Estimate of $1.25. Revenues grew 0.9% as 6% gain from volume growth and 2% contribution from acquisitions were partially offset by 7% negative impact from currency translation. Operating profits declined 10.1% year over year, while the margin came in at 22.2%.
Nordson Corporation anticipates total sales volume to decline 3−7% year over year in fourth-quarter fiscal 2015. Organic volume is predicted in a range of 1% fall to 3% growth, while acquisitions are expected to contribute 1%. These will, however, be partially offset by 7% negative impact from adverse foreign currency movements. Generally Accepted Accounting Principles (“GAAP”) earnings are projected in a range of $1.00−$1.12 per share, including 14 cents per share of negative impact from currency movements.
Lackluster results as well as outlook triggered downward revision in earnings estimates for Nordson Corporation. Over the last 30 days, the Zacks Consensus Estimate for the stock decreased 5.8% to $3.72 for fiscal 2015 and 9.5% to $4.08 for fiscal 2016. Also, the earnings estimate for fourth-quarter fiscal 2015 has slipped 11.5% to $1.08 per share.
Stocks to Consider
Nordson Corporation currently has a market capitalization of $4 billion. Better-ranked stocks in the machinery industry include Atlas Copco AB ATLKY, Graco Inc. GGG and Luxfer Holdings PLC LXFR. All three stocks hold a Zacks Rank #2 (Buy).
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GRACO INC (GGG): Free Stock Analysis Report
NORDSON CORP (NDSN): Free Stock Analysis Report
ATLAS COP-ADR A (ATLKY): Free Stock Analysis Report
LUXFER HOLDINGS (LXFR): Free Stock Analysis Report
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