In the third week of May, the manufacturer of dispensing equipment, Nordson Corporation (NASDAQ: NDSN), reported it’s 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 the countries in the American continent put together, recorded a 15.4% growth in revenue to $33.6 million. Similarly, revenue from Europe increased by 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 by 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 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 the second quarter was $302 million, up 5% from the prior year’s 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.
Thus, a one-touch call option would be the best pick for a binary trader under this scenario. With an expiry period in the first week of July and a strike price of $95 or lower, there is a higher chance of concluding the trade in profit.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
