Nordson Delivers as Promised on Acquisition Growth

Nordson Corporation (NASDAQ: NDSN) announced solid fiscal second-quarter 2018 results on Monday after the market closed, including an expected decline in organic volume that was more than offset by acquisitive growth.

Thanks to its disappointing forward outlook, shares of the adhesive-dispensing systems specialist are down around 6% in after-hours trading as of this writing -- albeit after a more than 3% gain in Monday's regular session. Let's take a closer look at what Nordson accomplished over the past few months, and what investors should watch for the remainder of the year.

Nordson results: The raw numbers

What happened with Nordson this quarter?

• On a non-GAAP basis -- which notably excludes one-time items such as discrete tax adjustments, and $0.16 per share in acquisition costs in last year's fiscal Q2 -- Nordson's earnings increased 15.6% year over year to $1.56 per share -- above most investors' expectations for earnings of $1.43 per share.
• Nordson's top line included a 1% decline in organic volume, 7% growth related to acquisitions, and a 5% favorable effect from foreign currency translation.
• These results were roughly in line with Nordson's latest guidance (provided in February), which called for a change in organic volume of down 3% to up 1%, a 7% contribution from acquisitions, and a 5% favorable impact from currencies.
• Adjusted EBITDA grew 15.4% year over year to $157.5 million.
• Revenue by segment included:
• 5.2% growth from Adhesive Dispensing Systems, to $238.8 million, including a 1.7% decline in organic volume and a 6.9% contribution from currencies.
• 19.4% growth from Advanced Technology Systems, to $250.8 million, including 16.2% organic volume growth and a 3.2% contribution from currencies.
• 8.5% growth from Industrial Coating Systems, to $64.1 million, including 4.3% organic volume growth and a 4.2% contribution from currencies.
• Nordson's backlog for the quarter increased 11% year over year to $460 million, including 10% organic volume growth and 1% growth from acquisitions.

What management had to say

Nordson CEO Michael Hilton stated:

Looking forward

For the current third quarter of fiscal 2018, Nordson anticipates revenue will arrive in the range of down 3% to up 1% from the same year-ago period. This assumes a change in organic volume of down 6% to down 2%, 1% growth from first-year acquisitions, and a positive 2% contribution from currency exchange. When all is said and done, that should translate to GAAP earnings per diluted share of $1.47 to $1.63.

By comparison -- and though we don't usually pay close attention to Wall Street's demands -- consensus estimates were more optimistic in predicting year-over-year revenue growth of 5.2% and earnings of $1.91 per share.

Still, Hilton once again suggested that investors keep in mind Nordson's fiscal Q3 2018 laps an "exceptionally strong" year-ago quarter in which organic sales growth arrived at 11%.

"Our global team remains committed to delivering the best technology solutions while employing continuous improvement initiatives to drive bottom line results," Hilton elaborated, "and we expect to generate total company organic sales growth in the low single-digits on a full year basis for fiscal 2018."

All things considered, this was indeed a strong showing that shows Nordson's core business is on solid ground. But while Nordson is certainly up against a tough comparable next quarter, it's obvious investors wanted more.

10 stocks we like better than NordsonWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Nordson wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of Nordson. The Motley Fool has a disclosure policy.