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Reasons Why You Should Avoid Betting on Nordson (NDSN) Stock
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Nordson Corporation (NDSN - Free Report) has failed to impress investors with its recent operational performance due to weakness in the Advanced Technology Solutions segment, rising operating expenses and forex woes. These factors are likely to impede NDSN’s earnings in the quarters ahead.
Let’s discuss the factors that might continue taking a toll on this Zacks Rank #5 (Strong Sell) company.
Business Weakness: Weakness in the electronics end market, owing to a decrease in consumer discretionary spending, remains a concern. This is reflected in the Advanced Technology Solutions segment’s results, which declined 22.4% in the fiscal second quarter of 2024 (ended April 2024). Increasing product prices, due to the rise in the cost of component parts, have led to a decline in demand for electronics items. Also, supply-chain disruptions, particularly related to the availability of electronic components, remain a concern for the company.
Steep Costs: Nordson has been dealing with the adverse impacts of operating expenses. In the fiscal first quarter, the company’s selling and administrative expenses increased 2.4% year over year due to rising acquisition costs. The trend continued in the second quarter, with selling and administrative expenses increasing 9.8% year over year to $197.3 million. The impact of these expenditures is evident in the rise of the selling and administrative expenses as a percentage of total revenues, which climbed 270 basis points to reach 30.3% in the same period. Escalating expenses pose a threat to Nordson’s bottom line.
Forex Woes: Nordson’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar may require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the fiscal second quarter, foreign currency translation had an adverse impact of 0.7% on sales. Also, being the most globally diverse, the Industrial Precision solution segment is highly exposed to foreign currency headwinds. The unfavorable currency effect lowered the segment’s sales by 0.8% in the fiscal second quarter.
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for NDSN’s fiscal 2024 (ending October 2024) earnings has been revised 5.3% downward.
Price Performance: Shares of the company fell 1.4% in the past year against the industry’s 16.7% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Better-ranked companies from the Industrial Products sector are discussed below.
The Zacks Consensus Estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have gained 1.2% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 8.2%.
The consensus estimate for AIT’s fiscal 2024 earnings has improved 1.4% in the past 60 days. The stock has risen 39.1% in the past year.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.
The Zacks Consensus Estimate for CR’s 2024 earnings has increased 4.2% in the past 60 days. Its shares have gained 78.9% in the past year.
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Reasons Why You Should Avoid Betting on Nordson (NDSN) Stock
Nordson Corporation (NDSN - Free Report) has failed to impress investors with its recent operational performance due to weakness in the Advanced Technology Solutions segment, rising operating expenses and forex woes. These factors are likely to impede NDSN’s earnings in the quarters ahead.
Let’s discuss the factors that might continue taking a toll on this Zacks Rank #5 (Strong Sell) company.
Business Weakness: Weakness in the electronics end market, owing to a decrease in consumer discretionary spending, remains a concern. This is reflected in the Advanced Technology Solutions segment’s results, which declined 22.4% in the fiscal second quarter of 2024 (ended April 2024). Increasing product prices, due to the rise in the cost of component parts, have led to a decline in demand for electronics items. Also, supply-chain disruptions, particularly related to the availability of electronic components, remain a concern for the company.
Steep Costs: Nordson has been dealing with the adverse impacts of operating expenses. In the fiscal first quarter, the company’s selling and administrative expenses increased 2.4% year over year due to rising acquisition costs. The trend continued in the second quarter, with selling and administrative expenses increasing 9.8% year over year to $197.3 million. The impact of these expenditures is evident in the rise of the selling and administrative expenses as a percentage of total revenues, which climbed 270 basis points to reach 30.3% in the same period. Escalating expenses pose a threat to Nordson’s bottom line.
Forex Woes: Nordson’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar may require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the fiscal second quarter, foreign currency translation had an adverse impact of 0.7% on sales. Also, being the most globally diverse, the Industrial Precision solution segment is highly exposed to foreign currency headwinds. The unfavorable currency effect lowered the segment’s sales by 0.8% in the fiscal second quarter.
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for NDSN’s fiscal 2024 (ending October 2024) earnings has been revised 5.3% downward.
Price Performance: Shares of the company fell 1.4% in the past year against the industry’s 16.7% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Better-ranked companies from the Industrial Products sector are discussed below.
Belden Inc. (BDC - Free Report) presently carries a Zacks Rank #2 (Buy) and has a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have gained 1.2% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 8.2%.
The consensus estimate for AIT’s fiscal 2024 earnings has improved 1.4% in the past 60 days. The stock has risen 39.1% in the past year.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.
The Zacks Consensus Estimate for CR’s 2024 earnings has increased 4.2% in the past 60 days. Its shares have gained 78.9% in the past year.