Nordson Lowers Full-Year Guidance as New Order Pace Slows Down in Fiscal Q1; Lowering FVE

We are lowering our fair value estimate for narrow-moat-rated Nordson NDSN to $235 from $239 after the company reported its fiscal first-quarter earnings. Nordson’s adjusted EPS of $1.95 decreased by roughly 6% from $2.07 in the prior-year period, as the company grappled with foreign currency headwinds as well as a surge in COVID-19 cases in China. Our fair value reduction reflects our slightly more muted near-term revenue growth and operating margin projections, partially offset by time value of money.

Nordson’s fiscal first-quarter organic sales increased by 1.4% year over year, as 8.6% growth in the Americas and 10.7% growth in Europe were partially offset by a 13.3% decline in Asia-Pacific. Industrial precision solutions organic sales grew by 1.2% despite some challenges in Asia-Pacific due to labor shortages. Medical and fluid solutions organic sales declined by 0.8% due to softness in the medical fluid components and fluid solutions product lines in China. Lastly, advanced technology solutions delivered a 4.6% organic sales increase, fueled by growth in test and inspection systems.

Nordson lowered its guidance for fiscal 2023 and now anticipates full-year revenue growth of 0%-3% (down from 1%-7%) and adjusted EPS of $8.75-$9.50 (down from $8.75-$10.10). The lowered guidance reflects a slowdown in the pace of new orders as well as some customers pushing delivery dates out to the second half of the fiscal year. Management said on the earnings call that a majority of the decrease is due to a softening of orders in the semiconductor and electronics end markets, with the remainder due to a delay in the recovery in the biopharma end market. In industrial precision solutions, demand is growing in automotive and remains steady in the industrial and consumer nondurable product lines.