8-K: Nordson Corporation Reports Mixed Q1 2025 Results, Backlog Grows 15%

Nordson Corporation's Q1 2025 sales decreased by 2.8% year-over-year, but backlog grew by 15%, and the company provides Q2 guidance.

Summary

• Nordson Corporation reported its first quarter fiscal 2025 results, with sales of $615 million, a 2.8% decrease compared to the prior year's $633 million.
• The sales decrease includes an 8% positive impact from acquisitions, offset by a 9% organic sales decrease and a 2% unfavorable currency translation.
• Earnings per diluted share were $1.65, while adjusted earnings per diluted share were $2.06, a 7% decrease from the prior year's $2.21.
• Net income was $95 million, compared to $110 million in the prior year.
• EBITDA was $188 million, or 31% of sales, a 4% decrease from the prior year's $197 million, which was also 31% of sales.
• Backlog grew by approximately $85 million during the quarter, reaching $670 million.
• The company expects second quarter fiscal 2025 sales to be in the range of $650 to $690 million.
• Second quarter adjusted earnings are forecasted to be in the range of $2.30 to $2.50 per diluted share.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While sales and earnings are down, backlog growth and positive Q2 guidance provide some optimism. Management's comments are cautiously optimistic.

Positives

• Backlog grew by 15%, indicating potential for future revenue growth.
• Medical and Fluid Solutions sales increased by 21%, driven by acquisitions.
• Strategic cost reduction actions and manufacturing footprint optimization actions helped maintain Advanced Technology Solutions operating profit despite lower sales.
• Order entry continued to improve throughout the quarter.

Negatives

• Sales decreased by 2.8% year-over-year.
• Earnings per diluted share decreased from $1.90 to $1.65.
• Adjusted earnings per diluted share decreased by 7% from $2.21 to $2.06.
• Industrial Precision Solutions and Advanced Technology Solutions experienced sales declines.
• Organic sales decreased by 9% overall.
• Medical and Fluid Solutions experienced an 11% organic sales decline.

Risks

• The company acknowledges weakness across multiple end markets as they exited calendar year 2024.
• Macroeconomic conditions remain choppy, creating uncertainty in end market demand and capital investment.
• The company is exposed to risks related to U.S. and international economic conditions, currency exchange rates, and possible acquisitions.
• The company is exposed to risks related to political unrest, acts of terror, natural disasters and pandemics.

Future Outlook

The company expects second quarter fiscal 2025 sales to be in the range of $650 to $690 million and adjusted earnings to be in the range of $2.30 to $2.50 per diluted share. Management believes they are well positioned for growth as end market uncertainties abate and capital investment demand improves throughout 2025.

Management Comments

• 'We experienced weakness across multiple end markets as we exited calendar year 2024, resulting in sales performance at the low end of our guidance range for our first fiscal quarter,' said Nordson President and CEO Sundaram Nagarajan.
• Nagarajan also stated that they were encouraged to see broad order entry acceleration during the quarter, and backlog grew by approximately $85 million.
• Nagarajan noted that the company delivered earnings in line with their guidance mid-point.
• Nagarajan believes the company is well positioned for growth as end market uncertainties abate and capital investment demand improves throughout 2025.
• 'We have demonstrated the ability to deliver best-in-class profitability in varying market scenarios, while remaining invested in the long-term growth priorities of the Company,' said Nagarajan.

Industry Context

Nordson operates in the precision technology industry, serving diverse end markets including consumer non-durable, medical, electronics, and industrial. The results reflect current macroeconomic conditions and specific challenges in certain end markets, such as medical interventional solutions, where customer destocking trends impacted demand. The company's diversified portfolio and strategic cost reduction actions are aimed at mitigating these challenges and positioning the company for future growth.

Comparison to Industry Standards

• Comparing Nordson's performance to companies like Illinois Tool Works (ITW) or Roper Technologies, which also operate in diversified industrial segments, reveals that Nordson's revenue decline is within the range of what some peers have experienced given current market conditions.
• Nordson's EBITDA margin of 31% remains competitive with industry leaders, suggesting effective cost management despite sales pressures.
• The 15% backlog growth is a positive indicator, potentially outperforming some competitors who may be facing order slowdowns.
• However, the organic sales decline of 9% is a point of concern and may lag behind peers who have managed to maintain or grow organic sales through innovation or market share gains.
• For example, a company like 3M, while facing its own challenges, often relies on new product introductions to drive organic growth, a strategy Nordson could further emphasize.

Stakeholder Impact

• Shareholders may be concerned about the decrease in sales and earnings, but encouraged by the backlog growth and Q2 guidance.
• Employees may face uncertainty due to the challenging market conditions, but the company's focus on long-term growth priorities could provide reassurance.
• Customers may experience some impact from the weaker sales in certain segments, but the company's diversified portfolio and applications expertise should ensure continued service.
• Suppliers may see some impact from the sales decline, but the backlog growth and Q2 guidance suggest potential for future orders.
• Creditors may be monitoring the company's financial performance, but the EBITDA margin and backlog growth should provide some comfort.

Next Steps

• Management will provide additional commentary on the results and outlook during a webcast on February 20, 2025.
• The company will focus on leveraging its diversified portfolio and NBS Next competitive advantages to drive growth as end market uncertainties abate.

Key Dates