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Why Oppenheimer Upgraded Nordson (NDSN)

NEW YORK (TheStreet) -- Oppenehimer upgraded Nordson (NDSN) ahead of its earnings after the bell Tuesday. The investment firm upwardly revised the industrial machinery maker to "outperform" from "perform" with a price target of $85. 

Oppenheimer said it revised its rating due to the company's significant investments in future growth which should pay off in the long run. 

Also See: Nordson Announces Second-Quarter Dividend

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TheStreet Ratings team rates NORDSON CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NORDSON CORP (NDSN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.49, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for NORDSON CORP is rather high; currently it is at 58.85%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.55% is above that of the industry average.
  • Despite the weak revenue results, NDSN has outperformed against the industry average of 17.6%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • NORDSON CORP's earnings per share declined by 11.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, NORDSON CORP reported lower earnings of $3.42 versus $3.45 in the prior year. This year, the market expects an improvement in earnings ($3.82 versus $3.42).
  • In its most recent trading session, NDSN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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