Nordson Corp stock (NASDAQ: NDSN) experienced a significant drop of nearly 10% on May 21 after reporting its Q2 fiscal 2024 results. Although the company beat street estimates for earnings, its revenues fell short, leading to concerns among investors. The stock has underperformed the S&P500 index this year, with an 8% decline compared to a 12% increase for the index.
Over the past three years, NDSN stock has shown gains of 25%, but its performance has been inconsistent, with negative returns in some years. In 2023, the stock underperformed the S&P 500, highlighting the challenges individual stocks face in consistently beating the benchmark index. In contrast, the Trefis High Quality Portfolio, a collection of 30 stocks, has outperformed the S&P 500 each year over the same period, providing better returns with less risk.
Looking ahead, Nordson Corp faces macroeconomic uncertainties such as high oil prices and elevated interest rates, which could impact its performance in the coming year. Analysts’ price estimates suggest a potential upside of around 20% from its current levels, but this may see downward revisions following a guidance cut for fiscal 2024. Despite the recent decline, NDSN stock is trading at a historically average price-to-revenue multiple, indicating that it is appropriately priced at its current levels.
In Q2 2024, Nordson reported revenues of $651 million, in line with the prior-year quarter. While the acquisition of ARAG contributed 5% to revenues, organic sales faced pressure, particularly in electronics product lines. The company’s segments saw varying performances, with Industrial Precision sales up 9% year-over-year, Medical & Fluid Solutions revenue up 2%, and Advanced Technology Solutions sales down 22% during the quarter. Nordson’s EBITDA margin remained stable at 31%, but its bottom line of $2.34 was 4% lower than the prior-year quarter.
Looking forward, Nordson expects its revenue to increase by 0% to 2% from the $2.6 billion reported in fiscal 2023, with adjusted earnings projected to be between $9.35 and $9.75 per share. This guidance reflects challenges in electronics product lines and the agriculture cycle in Europe. Given the near-term headwinds and a valuation multiple in line with historical averages, NDSN stock is considered to be fully valued at its current levels of around $245.
