Nordson Beats Q2 Estimates on Strong Q3 Outlook

Nordson Beats Q2 Estimates on Strong Q3 Outlook
June 7, 2016

 
In the third week of May, the manufacturer of dispensing equipment, Nordson Corporation (NASDAQ:NDSN), reported its fiscal 2016 second-quarter net income and revenue that beat analysts’ estimates. The notable second-quarter results propelled the share price of Nordson to a high of about $87, from the prior close of $76.18. Almost two weeks later, the share price continues to hover near the 12-month high of $89.2. It now seems that fundamentally, due to the reasons provided below, the share price is poised for a further uptrend in the price.

The revenue of the Westlake, Ohio based company was $437.59 million for the fiscal 2016 second-quarter. The reported revenue went past the analysts’ estimates of $415.52 million in an easy manner. The company reported $400.73 million in the second-quarter of fiscal 2015.

Region wise, on a constant currency basis, the revenue from the US declined 6.3% to $13.13 million. However, the rest of countries in the American continent, put together, recorded a 15.4% growth in revenue to $33.6 million. Similarly, revenue from the Europe increased 19.5% to $125.9 million.

The GAAP net income for the second-quarter was $70.601 million or $1.23 per share, up from $49.214 million or $0.80 per share in the similar period of fiscal 2015. Excluding costs, the non GAAP earnings of $1.19 per share comfortably exceeded the analysts’ estimates of $0.93 per share.

The company continues to implement initiatives for margin expansion. During the second-quarter, the operating margin increased 3% to 28%. Excluding the one-time costs reported for the restructuring activities, the margin would have been 29%.
For the third quarter, on a y-o-y basis, Nordson anticipates a 1% to 5% increase in the sales. The GAAP earnings per share for the third quarter is expected to be in the range of $1.25 to $1.37. The company’s earnings guidance is based on an operating margin of 24%.

The order backlog at the end of second-quarter was $302 million, up 5% from the prior year similar quarter. Nordson also declared a dividend of $0.24 per share, payable on June 10, 2016. Thus, considering the positives, it can be understood that the share price would remain bullish during the third quarter.

Technically, as indicated by the bubble mark, the stock is consolidating at 87 levels. This indicates the possibility of a further uptrend in the price. The RSI reading, on the other hand, is at 67. This means that the RSI reading would decrease further to about 57 before rising upwards. Once the RSI starts rising, the price would begin its next upward journey. Considering the historic data, we can expect the price to reach $97 or even higher during the uptrend.

Nordson Corporation - Technical Analysis - 7th June 2016

Thus, a one touch call option would be the best pick for binary trader under this scenario. With an expiry period in the first week of July and strike price of $95 or lower, there is a higher chance of concluding the trade in profit.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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