Look for Another Steady Quarter From Nordson

By Markets Fool.com

Image source: Nordson.

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Nordson (NASDAQ: NDSN) is set to release fiscal third-quarter 2016 results after the market close on Monday, Aug. 22, 2016. Keeping in mind the adhesive-dispensing equipment maker last week raised its quarterly dividend by 13%, to $0.24 per share -- marking its 53rd consecutive year of annual dividend increases -- and with shares up more than 20% since last quarter's encouraging beat, now is a great time for investors to start thinking about what to expect when Nordson's report hits the wires.

Nordson's headline numbers

Three months ago, Nordson management continued to cite global macroeconomic headwinds as holding back the company's top-line gains, and warned the coming quarter's results will face a difficult comparison given strong organic growth in the same year-ago period. As such, Nordson's guidance calls for fiscal Q3 revenue to increase a modest 1% to 5% on a year-over-year basis, or to a range of roughly $467.4 million to $485.9 million. This assumes a 1% decline to 3% increase in organic volume, 3% growth from acquisitions over the past year, and a 1% headwind from foreign currency exchange.

And while revenue growth remains constrained, we should keep an eye on whether Nordson's ongoing margin enhancement efforts are on track. Through initiatives including footprint consolidation, placing strategic limits on head count growth, and reducing other spending where appropriate, Nordson aims to achieve a 200-basis-point improvement in fiscal 2015 normalized operating margin by the end of fiscal 2017. In the meantime, current guidance calls for fiscal Q3 2016 operating margin of 24%, which should translate to GAAP earnings per diluted share of $1.25 to $1.37.

Digging deeper

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Drilling further down, listen for changes in both order rates for Nordson's most recent 12-week period (up 4% at constant currency last quarter), and backlog (up 5% year over year, to $302 million last quarter, including 2% from acquisitions and 3% organic growth).

Nordson should also offer organic and acquisitive growth for each of its business segments. On one hand, for example, adhesive dispensing systems' organic sales volume rose 9% year over year last quarter -- marking its fourth straight quarter of strong organic growth -- while the segment's acquisition of WAFO last year contributed an increase of less than 1%. Advanced technology systems' sales volume also climbed 23%, including 20% organic growth and 3% from acquisitions. On the other hand, industrial coating systems sales declined 13% last quarter given softness in the U.S. and Japan, albeit primarily due to an unusually strong performance from the segment a year earlier.

Nordson will also provide insight on geographic contributions. For perspective, last quarter the U.S. comprised around 30% of total sales, the rest of the Americas were 7.7%, Europe was 28.8%, Japan was 6.7%, and the remaining Asia-Pacific region represented 26.8% of overall revenue. Assuming no unexpected changes in order timing or regional demand -- driven by, for instance, uncertainty stemming the recent Brexit vote -- this composition should remain roughly consistent.

Looking forward

Finally, listen for financial guidance for the current (fiscal fourth-) quarter, as well as any color on the coming fiscal year. Similar to its most recent guidance, the former should include approximate ranges for both per-share earnings and revenue, expectations for organic and acquisitive growth, and any consequences of foreign currency exchange.

However, given persistent global macroeconomic pressure and Nordson's past apprehension for predicting specific long-term financials,I wouldn't expect too much detail regarding preliminary full-year fiscal 2017 guidance. Rather, for better or worse, Nordson should give investors an idea of any changes to its continuous improvement initiative goals, and its efforts to position itself to continue creating shareholder value regardless of whether it operates in a difficult market. If Nordson can do just that, investors should remain pleased with where the company stands today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Nordson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.