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NORDSON CORP (NDSN)·Q4 2024 Earnings Summary
Executive Summary
- Q4 revenue was $744 million, up 4% year over year, with acquisitions (+6%) and FX (+1%) offsetting a 3% organic decline; adjusted EPS was $2.78 versus $2.71 in Q4’23, while GAAP EPS fell to $2.12 from $2.22 .
- Management highlighted results above the quarter’s guidance expectations; ATS returned to year-over-year growth with 27% EBITDA margins as electronics demand improved into year-end, while MFS saw softness in interventional solutions; integration of Atrion contributed positively .
- FY25 guidance initiated: sales $2.75–$2.87B and adjusted EPS $9.70–$10.50; Q1 FY25 sales $615–$655M and adjusted EPS $1.95–$2.15, with a 19–21% effective tax rate and conservative end-market assumptions (electronics, agriculture) .
- Backlog entered FY25 at
$580M ($550M ex-Atrion); recurring revenue is ~57% and book-and-ship mix limits backlog reliance; a seasonal and Chinese New Year timing effect expected to modestly weaken Q1 vs normal .
What Went Well and What Went Wrong
What Went Well
- ATS achieved 27% EBITDA margin in a down cycle, aided by NBS Next and improved mix; “ATS achieved 27% EBITDA margins while still in the downside of the electronic cycle due to its strategic repositioning” .
- Q4 operating conversion was strong: gross margin +110 bps YoY with ~35% incremental operating margin; adjusted operating profit margin up ~30 bps; “really strong quarter of both operational execution and the initial integration of the Atrion acquisition” .
- Atrion integration “progressing well” and contributed to the quarter; management sees synergies over 1–2 years with EBITDA improving toward Nordson-like margins .
What Went Wrong
- Organic sales declined 3% in Q4, with IPS facing tough comps (industrial coatings, polymer processing) and MFS seeing interventional solutions softness; GAAP EPS fell YoY on higher interest expense .
- IPS organic sales decreased 5% in Q4, driven by lower industrial coatings, polymer processing, and precision agriculture; operating profit fell 4% YoY on lower sales .
- MFS margins were slightly diluted by Atrion in Q4 (36% EBITDA vs 37% prior year), with organic sales down 3% due to cautious medical customer inventory patterns .
Financial Results
Segment breakdown:
KPIs and cash/backlog:
Geography (Q4):
- Americas $323.170M; Europe $185.350M; Asia Pacific $235.962M .
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- CEO: “Our Advanced Technology Solutions segment delivered year-over-year fourth quarter sales growth, as electronics demand continued to steadily improve… ATS… delivering a strong incremental operating performance” .
- CFO: “Adjusted operating profit… was $205 million, up 30 basis points… driven by gross margin improvements of about 110 basis points, reflecting factory efficiency gains and a higher mix of parts revenue” .
- CEO: “Atrion Medical acquisition… expands our fluid components’ addressable market by more than 50%… and broadens Nordson’s exposure to significant single-use consumables with recurring revenue streams” .
- CEO on ATS: “ATS achieved 27% EBITDA margins while still in the downside of the electronic cycle due to its strategic repositioning” .
- CFO on capital deployment: “We increased our annual dividend by 15%, marking our 61st year of consecutive annual increases… leverage ratio of 2.5x… within our targeted long-term range” .
Q&A Highlights
- Backlog detail: Atrion contributed ~$35M to backlog; ex-Atrion backlog ~$550M; recurring revenue ~57% with significant book-and-ship mix .
- Seasonality: Chinese New Year timing moves into Q1 FY25, typically ~$10–$20M sales impact, shifting production from Q1 to Q2 .
- ATS outlook: Q4 growth was “pretty normal” with positive order trends; modest improvement expected without significant capex ramp .
- Polymer processing: Downturn driven by reduced recycling investment in Europe and virgin polymer investment in Asia (China), after two record years .
- MFS destocking: Interventional solutions softness due to cautious OEM inventory; normalization expected over “another quarter or two” with long-term pipeline solid .
Estimates Context
- Wall Street consensus (S&P Global) for Q4’24 and Q1’25 was not retrievable due to SPGI daily request limit; therefore comparisons to external consensus are unavailable. Values retrieved from S&P Global.
- Company performance was above internal Q4 guidance, with adjusted EPS $2.78 and strong conversion; FY25 tax rate guided lower (19–21%) suggests potential upward revisions to EPS estimates if operating trends persist .
Key Takeaways for Investors
- ATS inflection appears durable at modest pace; 27% EBITDA margins in a down cycle indicate structural improvements via NBS Next—positioning for operating leverage when electronics capex returns .
- IPS faces near-term headwinds in large systems (industrial coatings, polymer processing) off tough comps, but high recurring parts mix (~57%) and nonwovens strength support stability .
- MFS organic softness tied to interventional destocking; Atrion offsets near term with strategic exposure to infusion/drug delivery consumables and expected EBITDA margin improvement over 1–2 years .
- Balance sheet and cash generation remain robust (FY24 FCF $492M, 105% conversion); leverage ~2.5x post Atrion within target range, providing flexibility for continued reinvestment and M&A .
- FY25 guidance embeds conservative end-market assumptions and FX headwinds; upside skews to stronger recovery in ATS and precision ag, while lower tax rate supports EPS resilience .
- Near-term trading: Watch Q1 seasonality and Chinese New Year effect; backlog normalization and order cadence in ATS will be key catalysts for sentiment .
- Medium-term thesis: Ascend strategy targets sustained 6–8% revenue CAGR and 10–12% adjusted EPS growth (2025–2029), with NBS Next driving margin quality across cycles .